Modvat credit on sheet and plate cuttings upheld; goods retained their character as sheets and plates, and penalties failed.

Modvat credit was held admissible on cuttings of sheets and plates cleared by a first stage dealer because the goods remained sheets and plates classifiable under Heading 72.08; they were only reduced in area, not thickness, and could not be treated as scrap under Heading 7204 for denying credit. The Rule 57G declaration matched the goods received, and the credit taken did not exceed the duty paid. As the buyer's credit was proper, no abetment or irregular availment could be attributed to the dealer, and the penalties on both the buyer and the dealer were not sustainable.

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Issues: Whether Modvat credit was admissible on cuttings of sheets and plates cleared by a first stage dealer as goods classifiable under Heading 72.08, and whether the related penalties on the buyer and dealer were sustainable.

Analysis: The cuttings supplied were found to be only reduced in area and not in thickness, and therefore retained the character of sheets and plates classifiable under Heading 72.08. The declaration filed under Rule 57G of the Central Excise Rules, 1944 matched the goods as received, and the credit taken did not exceed the duty paid on those cuttings. On that basis, the goods could not be treated as scrap under Heading 7204 for the purpose of denying credit. Once the credit was held to be proper in the hands of the buyer, no abetment or irregular availment could be attributed to the dealer.

Conclusion: Modvat credit was admissible, and the penalties imposed on both the buyer and the dealer were not sustainable.

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