Cut pieces of used steel sheets are not clearance of inputs as such; credit reversal was held unnecessary.

Cut pieces of MS and HR sheets left after use in manufacture were not treated as clearance of inputs as such under Rule 57F(4) of the Central Excise Rules, 1944. The Tribunal held that remnants arising after the inputs had been used in production could not be equated with removal of the original inputs as such, so reversal of credit was not required. On that basis, the demand and penalty were held unsustainable.

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Issues: Whether cut pieces of MS and HR sheets left over after use in manufacture were to be treated as clearance of inputs as such requiring reversal of credit under Rule 57F(4) of the Central Excise Rules, 1944.

Analysis: The respondents had removed only cut pieces of MS and HR sheets remaining after the inputs were used in manufacture of final products. Such remnants were not clearances of the original inputs as such. The legal provision invoked by the Revenue did not support reversal of credit on these facts. The Tribunal followed its earlier view that clearance of cut pieces of sheets after use could not be equated with removal of inputs as such.

Conclusion: The issue was decided in favour of the respondents. Credit reversal was not required and the demand and penalty were not sustainable.

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