Marketable scrap arising in manufacture is dutiable under the residuary tariff, with relief allowed for lawful in-factory burning.

Scrap rubber emerging in the manufacture of tyres and tubes was treated as manufactured goods because it acquired a distinct name, character and use, and was marketable as a raw material for other products; it therefore fell within the residuary excise entry and was liable to duty. However, duty on the quantity burnt within the factory was not sustained where the scrap was used as fuel or destroyed as unfit for consumption or marketing, so relief was available under the captive-use and remission provisions for that portion.

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Issues: (i) Whether scrap rubber arising in the manufacture of tyres and tubes was liable to central excise duty under Item 68 of the Central Excise Tariff; (ii) whether duty could be denied or remitted in respect of scrap rubber consumed by burning within the factory.

Issue (i): Whether scrap rubber arising in the manufacture of tyres and tubes was liable to central excise duty under Item 68 of the Central Excise Tariff.

Analysis: The scrap rubber emerged from the manufacturing process involving raw rubber, chemicals and yarn, and had a distinct name, character and use from the raw materials. It satisfied the test of manufacture and was also marketable, since it was bought and sold and used as a raw material for other rubber products. The fact that it was not intended to be manufactured did not prevent it from being treated as manufactured goods. Since it was goods not specifically named elsewhere in the tariff, it fell within the residuary entry.

Conclusion: The scrap rubber was chargeable to duty under Item 68.

Issue (ii): Whether duty could be denied or remitted in respect of scrap rubber consumed by burning within the factory.

Analysis: Duty demand on scrap rubber that was burnt within the factory was not justified if the material was used as fuel within the factory or was destroyed because it was unfit for consumption or marketing. In such cases, relief was available under the notification governing captive use as fuel and under the remission provision for destroyed goods.

Conclusion: Appropriate relief was directed for the quantity of scrap rubber burnt within the factory.

Final Conclusion: The levy on scrap rubber under the residuary tariff entry was sustained, but the assessee was entitled to relief for the quantity burnt within the factory.

Ratio Decidendi: A residual product arising in the course of manufacture, if it has a distinct identity and is marketable, is goods liable to duty under the residuary tariff entry, and remission or exemption may still apply to quantities lawfully burnt within the factory.

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