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2023 (2) TMI 775 - AT - Central ExciseProcess amounting to manufacture or not - waste and scrap is a result of manufacture as defined in section 2 (f) of the Central Excise Act or not - whether the used/broken pipes which are generated as waste in this case arise out of the process of manufacture or out of the process of maintenance of the capital goods? - HELD THAT:- When some waste is generated in the process of manufacture of the goods it comes out of the inputs directly or the inputs transform into some form. Input is that substance or material which, after transformation, becomes the output. By contrast, capital goods are those goods which are used in the manufacture or production of the goods without they themselves getting transformed. A block of iron, for instance, is an input to manufacture a machine part. In the process of manufacture the turnings and other forms of steel scrap arise. However, the lathe machine, the forging equipment, etc. which participate in converting the block of iron into the final part are capital goods. In this case, the pipes do not get consumed and do not get transformed into oil. They are used to manufacture/production of oil. Regardless of the fact that the use of pipes is essential for production of oil, the pipes by themselves are capital goods and are not inputs. When such pipes need repair or replacing and waste is generated in the process, it is a waste generated during the repair or maintenance of capital goods and not during the process of production of oil or any process incidental or ancillary to it. For this reason, no excise duty can be charged on the scrap of pipes produced in this manner. Similarly, the empty barrels are only packing material in which the inputs are received and these barrels are not generated during the process of manufacture. Therefore, no excise duty can be charged even on that scrap. The impugned orders cannot be sustained and need to be set aside - Appeal allowed.
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