Emptying used drums is not manufacture, and emptied containers are not scrap unless they cease to be usable.

Emptying drums after removal of contents did not amount to manufacture because no new commercially distinct product emerged; the drums remained drums, though used and depreciated. The emptied drums also could not be treated as scrap or waste under Note 6(a) to Section XVI, since there was no finding that they had ceased to be usable as containers merely because their contents had been removed. On that reasoning, the demand and penalty could not be sustained, and consequential relief followed.

---

---

Issues: (i) Whether emptying drums after removal of their contents amounted to manufacture. (ii) Whether the emptied drums could be treated as scrap or waste under Note 6(a) to Section XVI of the Tariff.

Issue (i): Whether emptying drums after removal of their contents amounted to manufacture.

Analysis: Manufacture requires emergence of a new commercially distinct product. Emptying the drums did not bring into existence any new article with a different name, character, or use. The drums remained drums, albeit used and possibly depreciated in value, and no process of manufacture was shown merely by removing their contents.

Conclusion: The issue is decided in favour of the assessee; emptying the drums did not amount to manufacture.

Issue (ii): Whether the emptied drums could be treated as scrap or waste under Note 6(a) to Section XVI of the Tariff.

Analysis: Scrap or waste would arise only if the drums had become unusable as drums by reason of wear and tear or other conditions. There was no finding that the drums had ceased to be usable as drums merely because they were used once or because their contents had been removed. On that footing, they could not be treated as waste or scrap within the tariff note.

Conclusion: The issue is decided in favour of the assessee; the emptied drums were not scrap or waste under Note 6(a) to Section XVI.

Final Conclusion: The demand and penalty could not be sustained, and the assessee was entitled to consequential relief.

Ratio Decidendi: Empty drums are dutiable only if a manufacturing process brings into existence scrap or waste as a distinct excisable result; mere emptying of containers does not constitute manufacture, and used containers do not become scrap unless they have ceased to be usable as containers.

---