Waste from duty-paid inputs is not excisable where no new product emerges and manufacture is not established.

Waste, scrap and parings generated from duty-paid paper and paper board during manufacture of match boxes were held not to be excisable goods because no new and distinct product emerged in name, character or use. The process did not amount to manufacture, as mere cutting, labour or manipulation of an existing material does not create a distinct marketable substance. Since the inputs were already duty paid and the residue was less valuable than the original material, a further levy would amount to double taxation of the same product. The demand, penalty and interest were therefore set aside.

---

---

Issues: Whether waste, scrap and parings generated from duty-paid paper and paper board in the course of manufacture of match boxes were goods liable to excise duty and whether the process amounted to manufacture.

Analysis: The paper and paper board used as inputs remained paper and paper board even when they emerged as small pieces, waste, scrap or parings. No new and distinct product in name, character or use came into existence. The inputs were already duty paid, and levy of duty on the waste and scrap would amount to taxing the same product again. The process also involved no value addition, since the input material was more valuable than the waste generated. Mere labour or manipulation, without emergence of a distinct new substance, does not constitute manufacture.

Conclusion: The waste, scrap and parings were not excisable goods and no duty was chargeable on them. The demand, penalty and interest were set aside, and the assessee succeeded.

Ratio Decidendi: Waste generated from duty-paid input material is not exigible to excise duty unless the process results in emergence of a distinct new product with a different name, character and use.

---