Classification of rubberised scrap turns on essential character, not metal weight; manufacturing residue was treated as non-dutiable.

Scrap arising during manufacture of tyres and related rubber products was analysed for classification as either metal waste and scrap under Chapter 72 or rubber waste and scrap under Heading 40.04. The decisive factor was the essential character of the scrap and the nature of the manufacturing residue, not merely the predominance of metal by weight or sale on a weight basis. Applying the principles in Modi Rubber and Premier Tyres, the scrap was treated as not acquiring the character of finished metal waste because it did not emerge as a new and distinct marketable article. On that basis, the scrap was stated to be not chargeable to excise duty.

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Issues: Whether the scrap of rubberised bead wires and rubberised steel belt fabrics was classifiable under Chapter 72 as metal waste and scrap, or under Heading 40.04 as rubber waste and scrap, and whether such scrap was chargeable to excise duty.

Analysis: The determining factor was the character of the products generated in the course of manufacture. The scrap arose during manufacture of tyres and related rubber products, and the Court relied on the principle that waste or scrap obtained in the manufacturing process is not necessarily a new manufactured product. The earlier Delhi High Court view in Modi Rubber and the Tribunal's earlier approach in Premier Tyres were applied to hold that the scrap did not acquire the character of finished metal waste merely because the metal content was predominant by weight or because the scrap was sold on a weight basis. The essential character of the material and the nature of the scrap as arising from rubberised products were treated as decisive.

Conclusion: The scrap of rubberised bead wires and rubberised steel belt fabrics was not chargeable to excise duty. The assessee's appeal was allowed and the Revenue's appeal was rejected.

Ratio Decidendi: Scrap arising in the course of manufacture, which does not result in a new and distinct marketable article and whose essential character is not that of recoverable metal waste, is not classifiable as metal scrap merely because metal predominates by weight.

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