Waste/scrap generated during the manufacturing process is not "goods" as defined under the Central Excise Act, 1944, and therefore, no excise duty is leviable on such waste/scrap.

( 1 ) THE short question raised in this petition under Article 226 of the Constitution of India is whether waste/scrap obtained in the course of manufacture of tyres, tubes, flaps and other products by the petitioner company are "goods" classifiable under Tariff Item 68 of C. E. T. and liable to excise duty.

( 2 ) M/s. Modi Rubber Ltd. , a company registered under the Companies Act, 1956, petitioner No. I, is carrying on the business of manufacturing and selling tyres, tubes, flaps and other rubber products. These goods are manufactured by the petitioner-company at its factory at Modipuram. For the purpose of manufacturing these goods, the petitioner-company mixes rubber with various other chemicals to form a rubber compound. A small quantity of the compound is rejected during the production process due to certain defects such as wrong mixing or over heating. The petitioner-company claims that this defective or rejected rubber compound is in the. nature of waste. At various stages of the manufacture of the goods, some quantity of rubber cuttings treated as waste also emerges. Then sub-standard and defective goods are destroyed by cutting and punching and is being treated as waste. The claim of the petitioners is that duty of excise is a duty on the event of manufacture as defined in the Central Excise and Salts Act, 1944 (hereinafter called the Act) and since there is no event of manufacture of waste, no duty is leviable.

( 3 ) A question had been raised and considered by the Central Board of Excise and Customs whether such waste arising during the processing of tyres should be classmable under Tariff Item 16-A (2) or 68 of Central Excise Tariff. The Central Board of Excise and Customs noticed that during the process of mixing of rubber compound, a small percentage of stock is rejected due to process, defects such as wrong mixing, over heating etc. and this stock is sold by the manufacturer as "scrap rubber compound" at a price lower than the price of raw rubber put in and similarly during the process of manufacture of tyre, scrap rubberised fabric are also generated as waste material. They took the view that since these articles of such :nature arise during the process of manufacture and these could be considered as "goods" resultant of manufacture. A view was taken that the waste arising during the processing of tyres is classifiable under Tariff Item 68 of C. E. T. Accordingly, the impugned trade notice dated July 8, 1981 was issued. The Central Excise Collector, Meerut, in consequence, issued the second impugned notice dated October 17, 1981 to the similar effect that. the waste arising out of process of tyres is classifiable under Tariff Item 68 of C. E. T.

( 4 ) THE contention of Mr. Lakshmi Kumaran, the learned counsel for the petitioners is that the petitioner company manufactures tyres, tubes, flaps and other rubber products, lie does not dispute the process and the resultant waste as noticed by the Central Board of Excise and Customs. His submission is that the said waste matters come into existence in the course of manufacture of tyres, tubes, flaps and other rubber products and the event of manufacture is not the waste matter but it is the manufacture of tyres, tubes, flaps and other rubber products. It is urged that since there is no event of manufacture of waste matter, no duty of excise can be levied thereon. In pursuance of the impugned directives, the petitioner company was called upon to furnish the information regarding the amount of waste arising in the course of manufacture of tyres. The correspondence exchanged between the petitioner company and Excise Authorities is on the record. Ultimately, the petitioner company declared the quantity of processed waste[scrap as on January 5, 1982 as follows :

"1. Rubber Compound 6. 5 M. T. 2. New Rejected Tyres Giant Tyres, Pass and ADV Tyres (excluding Bead) 700. 00 kg. 3. Tractor Tyres 200. 00 Kg. 4. Friction Waste 3 M. T. 5. Lab. Samples/cured Rubber