Removal of inputs as such under Modvat credit rules was not established where slit sheets arose during manufacturing.

Clearance of slit HR sheets was treated as part of the manufacturing process rather than removal of inputs as such, because the inputs had been issued for manufacture of steel tubes and pipes and were slit to the required sizes. Sheets that did not conform to the required dimensions were cleared on payment of appropriate duty, which meant the transaction did not attract reversal of Modvat credit. On these facts, the note records that the respondents were not required to reverse the credit and the Revenue's appeals failed.

---

---

Issues: Whether the clearance of slit HR sheets amounted to removal of inputs as such so as to require reversal of Modvat credit.

Analysis: The inputs were issued for manufacture of steel tubes and pipes, and the sheets were slit in the course of the manufacturing process to the required sizes. The clearances in question were of slits that did not conform to the required dimensions and were removed on payment of appropriate duty. On these facts, the clearance could not be treated as removal of the inputs as such.

Conclusion: The respondents were not required to reverse the Modvat credit, and the Revenue's appeals failed.

---