Modvat credit limits prevent a duty demand on finished goods without evidence of actual unaccounted manufacture or clearance.

A duty demand on the finished product could not be sustained merely because crown corks were shown as waste during manufacture, since the provision invoked was confined to wrongly availed or inadmissible Modvat credit on inputs. In the absence of evidence that Aerated Water was actually manufactured in the alleged quantity or cleared without duty, and with normal wastage in the filling process accepted as a manufacturing occurrence, the demand failed. The appeal was allowed in favour of the assessee.

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Issues: Whether duty could be demanded on the final product, Aerated Water, on the footing that crown corks shown as waste during manufacture were unaccounted for, and whether the demand could be sustained by invoking the Modvat provision applicable to inputs.

Analysis: The demand was not one for disallowance or recovery of Modvat credit on inputs, but a duty demand on the finished product based only on the quantity of crown corks reported as waste. The provision relied upon by the department was confined to wrongly availed or inadmissible Modvat credit and did not extend to a duty demand on the final product. The record also contained no investigation or evidence showing that Aerated Water was actually manufactured in the alleged quantity or cleared without duty on that basis. Normal damage of crown corks in the filling process was an accepted manufacturing occurrence, and no finding was recorded that the wastage was abnormal or outside the scope of normal wastage.

Conclusion: The demand was unsustainable and the appeal was allowed in favour of the assessee.

Final Conclusion: A duty demand on the finished product cannot be sustained merely by treating normal manufacturing wastage of inputs as proof of clandestine production or by applying a provision limited to inadmissible Modvat credit.

Ratio Decidendi: A provision governing Modvat credit on inputs cannot be used to impose duty on the final product in the absence of evidence of actual unaccounted manufacture or clearance, and normal manufacturing wastage cannot by itself support such a demand.

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