Duty-paid inputs retain exemption eligibility despite Modvat credit, preserving Notification No. 53/88 benefit for plastic waste and scrap.

Waste, scrap and paring of plastic arising in the manufacture of HDPE tape, fabrics, bags and sacks retained the character of duty-paid inputs where duty had already been paid on the material. Availment of Modvat credit did not convert such inputs into non-duty-paid goods for purposes of Notification No. 53/88 dated 1-3-1988. The notification's condition was therefore satisfied, and the exemption remained available to the respondents.

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Issues: Whether the benefit of Notification No. 53/88 dated 1-3-1988 was available to waste, scrap and paring of plastic arising during manufacture of HDPE tape, fabrics, bags and sacks when the inputs had suffered duty but Modvat credit had been availed.

Analysis: The waste, paring and scrap arose from material on which duty had already been paid. Mere availing of Modvat credit did not take away the duty-paid character of the inputs. The condition of the notification stood fulfilled, and the exemption could not be denied on the ground that the inputs were to that extent treated as non-duty paid.

Conclusion: The benefit of the notification was available to the respondents, and the Revenue's appeal was liable to be rejected.

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