Excise duty on processing waste rejected where metal scrap arose during grinding and was unsaleable in the factory.

Excise duty on metal waste arising during conversion of black bar into bright bar was held not to be attracted merely because the waste could fetch some market value. Waste generated during grinding and lying unsaleable within the factory was treated as processing loss, and exact mathematical correlation between raw materials and finished goods was not required. On that basis, the duty demand was found unjustifiable and the appeal was allowed.

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Issues: Whether duty was leviable on the quantity of metal waste arising during the process of converting black bar into bright bar.

Analysis: The waste was found to have arisen during grinding and was stated to be unsaleable and lying within the factory premises. It was held that excise duty is not attracted merely because an item of waste may fetch some price in the market. The difference between raw material and finished product was treated as explained by the processing loss, and exact mathematical correlation between raw materials and finished goods was not required.

Conclusion: The duty demand was unjustifiable and the appeal was allowed.

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