TMI Blog2023 (2) TMI 775X X X X Extracts X X X X X X X X Extracts X X X X ..... art 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. - EXCISE APPEAL NO. 53258 OF 2018 with EXCISE APPEAL NO. 52037 OF 2019 and EXCISE APPEAL NO. 52043 OF 2019 - FINAL ORDER NO. 50144-50146/2023 - Dated:- 17-2-2023 - MR. DILIP GUPTA, PRESIDENT AND MR. P.V. SUBBA RAO, MEMBER (TECHNICAL) Shri Kumar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s generated by the appellant and that it is sold. It is, therefore, marketable. The only question which arises is whether waste and scrap is a result of manufacture as defined in section 2 (f) of the Central Excise Act or through some other process. We find that Grasim Industries answers this question comprehensively. Paragraphs 7,8,14 and 15 of this judgment are produced below :- 7 . We have heard the learned counsel for the parties. In the present case, the assessee had undertook repair and maintenance work of his worn out old machinery or parts of the cement manufacturing plant for the period between 1995 to 1999. The assessee repaired machinery or capital goods such as damaged roller, shafts and coupling by using welding electrodes, mild steel, cutting tools, M.S. Angles, M.S. Channels, M.S. Beams etc. In this process of repair and maintenance, M.S. Scrap and Iron Scrap were generated in the workshop. It is not in dispute that these M.S. Scrap and Iron Scrap are excisable goods under Section 2(d) of the Act falling under the Chapter Heading 72.04 in the Schedule to the Tariff Act read with Note 8(a) to Section XV of the Tariff Act as metal scrap and waste‟. We are o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... do we find any indication that the process indicated is to amount to manufacture. To start with, the product was edible vegetable oil. Even after refining, it remains edible vegetable oil. As actual manufacture has not taken place, the deeming provision cannot be brought into play in the absence of it being specifically stated that the process amounts to manufacture. 8 . The goods have to satisfy the test of being produced or manufactured in India. It is settled law that excise duty is a duty levied on manufacture of goods. Unless goods are manufactured in India, they cannot be subjected to payment of excise duty. Simply because a particular item is mentioned in the First Schedule, it cannot become exigible to excise duty. [See Hyderabad Industries Ltd. v. Union of India, (1995) 5 SC 338 = 1995 (78) E.L.T. 641 (S.C.), Moti Laminates (P) Ltd v. CCE, (1995) 3 SCC 23 = 1995 (76) E.L.T. 241 (S.C.), CCE v. Wimco Ltd, (2007) 8 SCC 412 = 2007 (217) E.L.T. 3 (S.C.)]. Therefore, both on authority and on principle, for being excisable to excise duty, goods must satisfy the test of being produced or manufactured in India. In our opinion, the charging Section 3 of the Act comes into play ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sue of getting a new identity as M.S. Scrap and Iron Scrap as an end product due to manufacturing process does not arise for our consideration. The repairing activity in any possible manner cannot be called as a part of manufacturing activity in relation to production of end product. Therefore, the M.S. scrap and Iron scrap cannot be said to be a by-product of the final product. At the best, it is the by-product of the repairing process which uses welding electrodes, mild steel, cutting tools, M.S. Angles, M.S. Channels, M.S. Beams etc. 15 . Learned ASG has placed reliance on the decision of this Court in CST v. Bharat Petroleum Corpn. Ltd. (supra). In that case, the assessee purchased sulphuric acid and cotton for the manufacturing of kerosene and yarn/cloth. In the manufacturing process, the acid sludge and cotton waste emerged as a distinct product having commercial identity. The issue before this Court was that whether the assessee can be said to manufacture acid sludge and cotton waste. This Court observed that where a subsidiary product is turned out regularly and continuously in the course of a manufacturing business and is also sold regularly from time to time, an inten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Therefore, old pipes which have been replaced should be treated as waste generated in the course of maintenance of capital goods. 10. We have considered the submissions of both sides. 11. It is true that in case of production of oil, the use of pipes is absolutely essential and without using such pipes the final product namely oil cannot be produced at all. It is for this reason that the pipes suffer considerable wear and tear and require replacing. What needs to be decided in this case is 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. The distinction is subtle but clear. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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