Waste and scrap classification prevails over RG1 entry, and procedural lapse alone cannot sustain duty demand.

Duty could not be sustained on goods treated as waste and scrap merely because they were entered in RG1 as forgings. The accepted factual position was that the goods arose from manufacturing deficiencies and were in substance waste and scrap, so the register entry did not change their character for duty purposes. Lack of permission to transfer the goods to the waste and scrap account may have amounted to a procedural lapse and could attract penalty, but it did not justify treating the goods as forgings for levy. The record further showed that waste and scrap had been cleared on payment of appropriate duty.

---

---

Issues: Whether the duty demand could be sustained on goods treated as waste and scrap merely because they were entered in RG1 as forgings and no permission was obtained for transfer to the waste and scrap account.

Analysis: The goods were accepted as waste and scrap arising from manufacturing deficiencies and not as forgings. Once that factual position was accepted, the mere entry in RG1 as forgings did not justify levy of duty on the basis that the goods remained forgings. The absence of permission for transfer to the waste and scrap account might have exposed the assessee to penalty for procedural contravention, but it did not alter the nature of the goods for the purpose of duty. The record also showed that waste and scrap had been cleared on payment of appropriate duty.

Conclusion: The duty demand was not sustainable and the assessee succeeded.

---