Scrap from dismantled old capital goods is not manufacture-generated waste and scrap, so excise duty demand fails.

Scrap arising from dismantling, repair or maintenance of old and unusable machinery and capital goods is not waste and scrap generated in the course of manufacture, so it does not fall within the tariff entry relied upon for excise duty. The relevant section note was directed to waste and scrap emerging in the manufacture of iron and steel products, not scrap created by scrapping unserviceable machinery. On that basis, the duty demand and penalty were unsustainable, and the appeal succeeded with the impugned orders set aside.

---

---

Issues: Whether waste and scrap arising from dismantling, repair and maintenance of old and used machinery and capital goods could be treated as goods generated during the course of manufacture so as to attract duty under the tariff entry relied upon by the department.

Analysis: The show cause notices proceeded on the footing that the disputed scrap arose from dismantling of worn out machinery and from repair and maintenance of old machinery, and also recorded that the capital goods from which the scrap emerged were not credit-availing goods. The relevant section note invoked by the department was meant to cover waste and scrap arising in the course of manufacture of iron and steel products, not scrap generated by mere dismantling of unusable machinery. Scrap arising when capital goods are scrapped or dismantled after becoming unserviceable does not amount to waste and scrap generated in the course of manufacture.

Conclusion: The scrap in question was not liable to duty on the basis suggested by the department, and the demand and penalty could not be sustained.

Final Conclusion: The appeal succeeded, the orders below were set aside, and consequential relief followed according to law.

Ratio Decidendi: Scrap arising from dismantling or scrapping of old and unusable capital goods during repair and maintenance is not manufacture-generated waste and scrap for the purpose of excise classification and duty.

---