Exemption for polyurethane foam waste and scrap upheld where the underlying blocks were cleared at nil duty despite Modvat objections.

Waste, parings and scrap of flexible polyurethane foam skins were treated as eligible for exemption under Notification No. 53/88-C.E. because the underlying foam blocks had been cleared under Notification No. 217/87-C.E. without duty, making them effectively nil-duty inputs for this purpose. A departmental objection based on prior Modvat credit did not, by itself, bar the exemption claimed for the cut skins. The stated rationale follows the Tribunal's earlier approach in a similar foam matter and supports admissibility of the exemption for such waste and scrap.

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Issues: Whether waste, parings and scrap of flexible polyurethane foam in the nature of skins were entitled to the benefit of Notification No. 53/88-C.E. despite the department's objection based on Modvat credit and the duty status of the underlying foam blocks.

Analysis: The duty dispute related not to the foamed blocks themselves, but to the hard, unfoamed and partly foamed skins cut from those blocks. The blocks had been cleared without payment of duty under Notification No. 217/87-C.E., and were therefore treated as having suffered duty at nil rate. In those circumstances, the objection that the material had already enjoyed Modvat credit did not defeat the availability of the exemption claimed for the waste and scrap skins. Following the Tribunal's earlier view in the similar foam case, the exemption was held applicable.

Conclusion: The benefit of Notification No. 53/88-C.E. was held admissible to the assessee.

Final Conclusion: The impugned order was set aside and the appeal succeeded with consequential relief.

Ratio Decidendi: Where the relevant foam blocks were cleared under a nil-duty notification, waste, parings and scrap cut from such blocks could qualify for the exemption under the applicable notification, and a Modvat-credit objection relating to the raw material did not by itself defeat that exemption.

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