Manufacture requires a new marketable product; cutting defective tyres for scrap did not attract duty and exemption stayed available.

Further cutting and punching of defective cured tyres and tubes did not amount to manufacture of excisable waste and scrap. The goods had already emerged as cut tyres and cut tubes, and the subsequent destruction merely rendered them unusable for disposal; it did not create a new, distinct and marketable commodity. Heading 40.04 could not apply in the absence of manufacture, because tariff classification operates only after a manufacturing process is established. Accordingly, the goods continued to fall within Notification No. 76/86-C.E., and excise duty was not payable merely because they were sold by weight or described as cut tyres and cut tubes.

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Issues: Whether further cutting and punching of already manufactured and defective cured tyres and tubes amounted to manufacture of waste and scrap classifiable under Heading 40.04 so as to deny the benefit of Notification No. 76/86-C.E., and whether duty was payable on such cleared goods.

Analysis: The goods had already emerged as cut tyres and cut tubes and were covered by the exemption notification. The subsequent destruction of defective tyres and tubes by cutting and punching did not bring into existence a new manufactured product. Manufacture requires emergence of a new, distinct and marketable commodity, and the process adopted here was only a mode of rendering unusable goods fit for disposal as scrap. Heading 40.04 could not be applied to treat such already manufactured cured tyres and tubes, later rendered unfit for use, as waste and scrap produced by manufacture. The tariff entry classifies goods only after manufacture is established, and in the absence of a manufacturing process, no excise duty could be levied merely because the goods were sold by weight or were described as cut tyres and cut tubes.

Conclusion: The further cutting of defective cured tyres and tubes did not amount to manufacture of excisable waste and scrap, and the exemption under Notification No. 76/86-C.E. remained available. The Revenue's appeal failed.

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