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: 
No. I think you may be assuming that each instance has its own copy of the method definition, taking up that amount of space for each instance, which is not the case.

Editing to add:

In case you wonder how an instance method can be actually shared between the instances: It is because each call to an instance method implicity passes a reference to the instance object to the method. This is generally referred to as the "implicit this" In other words - when you define or call an instance method with two parameters like myMethod(a, b), you can think of it as actually being myMethod(this, a, b), and Java takes care of the this parameter for you, without your having to explicitly define or pass it.

(This, by the way, is handled differently in Python, where you have to explicitly put the object reference in as the first parameter of an instance method definition, though not in the call.)

For an explanation of what goes on at the Java bytecode level here's a link:
<http://www.artima.com/underthehood/invocationP.html>
(See stuff around: "The objectref is the implicit this pointer that is passed to any instance method.")
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.