1996 (8) TMI 318 - AT - Central Excise

Summary

Issues:
1. Disallowance of Modvat credit for defective stainless Ingots/Flats.
2. Disallowance of deemed credit benefit on Copper and Aluminium scrap.
3. Interpretation of waste and scrap under the Central Excise Tariff.
4. Justification of denial of Modvat credit and deemed credit benefit.

Analysis:
The appeal was against the Order-in-Original disallowing Modvat credit for defective stainless Ingots/Flats and deemed credit benefit on Copper and Aluminium scrap. The appellants, engaged in manufacturing steel products, faced a total demand of Rs. 56,06,745.30. The issue was whether the items received qualified as waste and scrap for availing Modvat credit. The adjudication disallowed Rs. 26,02,705/- of Modvat credit. The appellant's advocate argued that the items were rejected materials usable only for metal retrieval, falling under waste and scrap as per Section XV of the Central Excise Tariff. The advocate cited a tribunal decision to support the claim. The Departmental Representative supported the order, stating only items specified in the Govt. order could receive deemed credit.

The main issue was the definition of waste and scrap under the Central Excise Tariff. The Adjudicating Authority rejected Modvat credit for defective ingots/flats, as they were not declared as scrap. However, unusable ingots/flats should be considered waste and scrap as per the tariff. The denial of Modvat credit did not seem justified, and the order was unsustainable. Regarding the denied deemed credit benefit, the Authority did not establish the non-duty paid character of the items. The denial was based on the items not being specified in the Govt. order. However, the Chapter Note on waste and scrap should include all items falling within that category. The denial of Modvat credit on both counts was not justified, leading to the appeal's success and the order's setting aside.

In conclusion, the Tribunal ruled in favor of the appellants, allowing the appeal and providing consequential reliefs. The decision highlighted the importance of correctly interpreting waste and scrap under the Central Excise Tariff for determining eligibility for Modvat credit and deemed credit benefits.