Modvat credit and scrap duty: waste and scrap of capital goods was not independently dutiable without proof of credit availment.

Duty on waste and scrap of capital goods under the erstwhile Modvat regime arose only where Modvat credit had actually been taken on those capital goods, and the Revenue bore the burden of proving such availment. On the facts recorded, the capital goods were received before the credit scheme came into force and there was no rebuttal to the finding that credit had not been availed. In that situation, the scrap did not attract independent excise duty merely because it was cleared as waste and scrap, and the duty demand was held unsustainable.

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Issues: Whether duty was payable on clearance of waste and scrap of capital goods under Rule 57S and Rule 57AB of the Central Excise Rules, 1944, when Modvat credit on such capital goods was not proved to have been availed.

Analysis: The liability to duty on waste and scrap of capital goods under the erstwhile Modvat regime arose only where the capital goods were those on which Modvat credit had actually been taken. The onus to establish availment of such credit lay on the Revenue. On the facts found, the capital goods had been received before the credit scheme came into force and there was no rebuttal to the finding that Modvat credit had not been availed. In that situation, waste and scrap of capital goods did not attract independent excise duty merely because they were cleared as scrap.

Conclusion: The demand of duty was not sustainable and the Revenue's appeal failed.

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