Excise duty on aluminium dross and skimmings turns on marketability, and manufacturing residue stayed outside duty.

For excise purposes, aluminium dross and skimmings arising in manufacture were not treated as excisable goods under the pre-Tariff Item 68 regime because they were manufacturing residue, not marketable commercial commodities, so no duty was payable for that period. After the introduction of Tariff Item 68 and the explanation to Tariff Item 27, the same residues were still not brought within the residuary entry merely because they were excluded from the phrase "waste and scrap"; exclusion from that definition did not by itself make them goods classifiable to duty. Mere saleability was insufficient to establish marketability for excise.

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Issues: (i) Whether aluminium dross and skimmings arising during manufacture were excisable goods liable to duty under the tariff position prevailing before the introduction of Tariff Item 68. (ii) Whether, after the introduction of Tariff Item 68 and the explanation to Tariff Item 27, aluminium dross and skimmings became dutiable as goods excluded from the definition of waste and scrap.

Issue (i): Whether aluminium dross and skimmings arising during manufacture were excisable goods liable to duty under the tariff position prevailing before the introduction of Tariff Item 68.

Analysis: Excise duty under the charging provision applied only to excisable goods specified in the First Schedule. Dross and skimmings were not included in the relevant tariff item and were not covered by the definition of excisable goods. They were treated as manufacturing residue or waste arising in the process of production, not as goods having the character of marketable commercial commodities. The credit procedure under Rule 56A was concerned with duty-paid input materials used in manufacture, and the existence of process loss did not mean that the input was not used in manufacture of the finished goods.

Conclusion: Aluminium dross and skimmings were not excisable goods and were not liable to duty for the earlier period. The assessee succeeded on this issue.

Issue (ii): Whether, after the introduction of Tariff Item 68 and the explanation to Tariff Item 27, aluminium dross and skimmings became dutiable as goods excluded from the definition of waste and scrap.

Analysis: The explanation to Tariff Item 27 excluded dross, skimmings, ash and similar residues from the expression waste and scrap, but that exclusion did not convert such residues into goods for the purpose of the residuary entry. Tariff Item 68 applied only to goods otherwise capable of classification under the tariff but excluded from a specific item. Dross and skimmings were held to be refuse or ashes arising in the course of manufacture and not goods in the commercial sense. Mere possibility of sale did not establish marketability for excise purposes.

Conclusion: Aluminium dross and skimmings were not assessable under Tariff Item 68. The assessee succeeded on this issue as well.

Final Conclusion: The appeals failed because aluminium dross and skimmings were not dutiable goods in either period considered, and the duty demands were unsustainable.

Ratio Decidendi: For excise purposes, an article is dutiable only if it is goods having commercial marketability and falling within the relevant tariff entry; manufacturing residue such as dross and skimmings, though capable of sale, is not automatically excisable or classifiable under a residuary item.

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