Deemed Modvat credit denied on unconditionally exempt scrap, as exempt goods cannot qualify for credit under the Larger Bench rule.

Deemed Modvat credit was held inadmissible on copper utensil scrap that was unconditionally exempt from duty under Notification No. 177/88. The Tribunal applied the Larger Bench principle that deemed credit is not available on inputs or materials which have not suffered duty because they are covered by an unconditional exemption. On that basis, the credit claim was rejected and the appeal failed on merits.

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Issues: Whether deemed Modvat credit was admissible on copper utensil scrap that was unconditionally exempted from duty.

Analysis: The dispute turned on whether goods which had not suffered duty, being covered by an unconditional exemption under Notification No. 177/88, could still qualify for deemed Modvat credit. The Tribunal applied the Larger Bench ruling that no deemed Modvat credit is available on materials that are unconditionally exempted.

Conclusion: Deemed Modvat credit was not admissible on the exempt utensil scrap, and the appeal failed.

Final Conclusion: The denial of credit was upheld and the appeal was dismissed on merits.

Ratio Decidendi: Deemed Modvat credit is not available on goods that are unconditionally exempt from duty.

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