Credit reversal on manufacture-generated off-cuts rejected; penalty also failed once the underlying demand did not survive.

Clearance of end-bits or off-cuts of iron and steel arising after use in manufacture was not clearance of inputs as such, so reversal of the credit originally availed was not required. As the material was residual scrap generated in the manufacturing process rather than the original inputs, the credit demand failed. The penalty also could not be sustained because the substantive demand itself did not survive.

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Issues: Whether the remnants cleared after manufacture were inputs as such requiring reversal of credit, and whether the penalty could be sustained.

Analysis: The cleared material was held to be end-bits or off-cuts of iron and steel arising after use in manufacture, not clearance of inputs as such. On that basis, reversal of the credit originally availed was not required. Since the demand itself did not survive, the reduced penalty also could not be sustained.

Conclusion: The issue was decided in favour of the assessee. The clearance did not attract reversal of credit, and the penalty was not sustainable.

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