Modvat credit on used glass bottles need not be reversed when bottles were already used in manufacturing and then sold as scrap.

Credit was not required to be reversed on sale of empty glass bottles used as packing material in the manufacture of aerated waters, because the bottles had already been put to repeated use before removal. The record showed that the bottles sold were old, scratched, broken or otherwise unfit for reuse, and not new or unused inputs. On those facts, the condition under Rule 57F(1) was treated as satisfied since the inputs had been used in manufacture before disposal. Accordingly, no reversal of credit was payable on the used bottles, and the demand and penalty were unsustainable.

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Issues: Whether credit was required to be reversed on sale of empty glass bottles after use in the manufacture of aerated waters.

Analysis: The bottles had been put to use repeatedly as packing material, and the evidence did not support the finding that the bottles sold were new or unused. The material on record showed that the bottles were old, scratched, broken or otherwise no longer fit for reuse, and were sold after use. On these facts, the condition under Rule 57F(1) stood satisfied because the inputs had been used in the manufacture of final products before removal.

Conclusion: No reversal of credit was payable on the used glass bottles, and the demand and penalty were unsustainable.

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