Modvat credit on aluminium foil scrap was upheld where declared waste and scrap were captively consumed in further manufacture.

Modvat credit on aluminium sheet coil used as foil-stock was treated as admissible for payment of duty on rolled and extruded products manufactured from waste and scrap generated during aluminium foil production. Waste and scrap arising in that process was covered by Rule 57D of the Modvat Rules, and the scrap was captively consumed after the necessary declaration. The objection that the final products had been declared against the scrap input rather than the original foil-stock input was held to be only a technical defect. Since both the waste and scrap and the rolled and extruded products were duly declared under the Modvat scheme, denial of credit on that ground was unsustainable.

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Issues: Whether Modvat credit on aluminium sheet coil used as foil-stock could be utilised for payment of duty on rolled and extruded products manufactured out of waste and scrap generated in the course of manufacture of aluminium foils.

Analysis: Waste and scrap arising during the manufacture of aluminium foils was covered by Rule 57D of the Modvat Rules. The scrap was captively consumed in the manufacture of rolled and extruded products after the requisite declaration. The objection raised was only technical, namely that the rolled and extruded products had been declared as final products against the scrap input rather than against the original foil-stock input. The Tribunal held that this did not alter the substantive eligibility to utilise the credit, particularly when both the waste and scrap and the rolled and extruded products had been duly declared in the Modvat scheme.

Conclusion: The credit was admissible and the denial of Modvat credit on the stated technical ground was unsustainable.

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