Question: Does static methods and class are good for scalability ? I think so static class/method improves scalability of application and instance methods doesn't scales much. So is it good programming practice to write static method where ever it is possible ?

Answer: 
There are three problems to consider with static methods:

1. You may introduce a bottleneck if your static method has a large critical region. The largest of course is to declare the whole method synchronized. If it can only be executing one at a time then it's a potential issue;
2. Is whatever it's doing still consistent if you're running the same method in different VMs and on different machines? and
3. Any method that relies on static methods has problems with unit testing.

It's not generally considered best practice but static helper methods are common. Too complex and another approach should probably be considered.
Which form of scalability do you mean? The scalability, that the code is maintainable and extensible in big and small projects? Then using only static-methods hurt. Do you mean performance? If instance-methods are slower (what I don't believe in this generality), then this doesn't mean they don't scale. If they need twice the time as static-methods, they need also twice much time if you call them all 10000 times. Choosing the right algorithms and data-representation decide much more about the scalability of the performance.

At last, if you think static-methods are the way to go, you should not use an object-oriented language like Java. Try C or Pascal or classic Basic-dialects.