Modvat credit on inputs for dutiable waste upheld where exempt bulbs did not bar credit on waste cleared on duty.

Modvat credit was admissible on inputs used in manufacturing waste generated during production of gas-filled bulbs, where the waste was cleared on payment of duty. The waste was treated as the relevant final product for Modvat purposes and was specifically covered by the scheme, so proportionate credit on inputs attributable to that waste could not be denied merely because the bulbs themselves were exempt. The exemption applicable to the bulbs did not bar credit on the waste in these facts, and the departmental clarification on waste and scrap supported this construction. The Revenue's challenge therefore failed.

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Issues: Whether Modvat credit was admissible on inputs used in the manufacture of waste generated during the production of gas-filled bulbs, when the waste was cleared on payment of duty and the bulbs themselves were exempt.

Analysis: Waste arising in the course of manufacture was treated as the relevant final product for the purpose of Modvat, and the waste was specifically covered under the Modvat scheme. Since the waste was cleared on payment of duty, the assessee was entitled to proportionate Modvat credit on the inputs used in producing such waste. The embargo relating to exempt final products did not bar credit in these facts, and the departmental clarification on waste and scrap supported this view.

Conclusion: Modvat credit was admissible to the assessee, and the Revenue's challenge failed.

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