Broken glass bottles in aerated water filling were not treated as a new manufactured product for excise duty.

Broken glass bottles arising during the filling and loading of aerated water were not a new excisable product, because the bottles were duty-paid inputs received by the appellant, were not manufactured by it, and no distinct manufactured item emerged from their breakage. The view that waste or scrap may be excisable was held inapplicable on these facts, and the later Calcutta High Court approach that broken glass, cullets or bhagars in such circumstances are neither manufactured goods nor a by-product was preferred. Authorities cited by the Revenue were distinguished as fact-specific and concerned with Modvat treatment of waste under the relevant rules.

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Issues: Whether broken glass bottles arising during the process of filling and loading of aerated water amounted to a new excisable product liable to central excise duty.

Analysis: The glass bottles were received duty-paid and were not manufactured by the appellant. They broke during use in the filling process, and no new product emerged from the breakage. The reasoning that waste or scrap may be excisable was found inapplicable on these facts. The later Calcutta High Court view, holding that broken glass, cullets or bhagars arising in such circumstances are not manufactured goods or a by-product and are not excisable, was preferred over the earlier Tribunal view relied upon by the Revenue. The cases cited by the Revenue were distinguished as they dealt with different factual settings and the Modvat treatment of waste under the relevant rules.

Conclusion: The broken bottles were not liable to excise duty as a new manufactured product.

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