Manufacture-generated scrap is dutiable under the specific Modvat rule, and a trade notice cannot override the statute.

Aluminium scrap generated during manufacture was treated as dutiable under the specific scrap provision, not as inputs covered by the general Modvat removal rule. The analysis states that Rule 57F(2) applied to duty-paid inputs brought into the factory and later removed after credit, whereas manufacture-generated scrap fell within Rule 57F(4). Because the scrap had not suffered duty and did not fit the general input-removal category, its clearance attracted duty under the specific rule. A trade notice could not override the statutory scheme and, in any event, was not applicable to the relevant period.

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Issues: Whether aluminium scrap generated in the course of manufacture and cleared from the factory was removable without payment of duty under Rule 57F(2), or was liable to duty under Rule 57F(4), and whether a trade notice could alter that statutory position.

Analysis: The scrap generated in the factory was not input duty-paid goods received into the factory on which Modvat credit had been taken. Rule 57F(2) applied to inputs brought into the factory and later sent out after credit had been availed, whereas scrap generated during manufacture was specifically governed by Rule 57F(4). Since the scrap had not suffered duty and did not fall within the category contemplated by Rule 57F(2), its removal outside the factory attracted duty under the specific scrap provision. Any trade notice contrary to the statutory scheme could not prevail over the rules, and in any event the relied-upon notice was not applicable to the relevant period.

Conclusion: The scrap was dutiable under Rule 57F(4), and no question of law arose for reference.

Final Conclusion: The reference application failed because the statutory Modvat scheme treated manufacture-generated scrap separately from duty-paid inputs, and executive instructions could not displace the rules.

Ratio Decidendi: Where a statute specifically governs scrap generated in manufacture, that specific provision applies in preference to the general Modvat removal provision, and a trade notice cannot override the rules.

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