Waste classification preserves Modvat credit where cut tyres and tubes remain non-manufactured goods despite tariff classification.

Cut tyres and cut tubes cleared at nil duty were treated as waste, not manufactured products, for Modvat purposes. Their classification under sub-heading 4004.00 did not change their legal character, and Rule 57D applied to protect input credit. Modvat credit on inputs used in producing the cut tyres and tubes could not be denied merely because the goods were cleared without duty under an exemption notification. The assessee was therefore entitled to the credit, and the Revenue's objection failed.

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Issues: Whether cut tyres and cut tubes cleared at nil rate of duty were to be treated as waste or as manufactured products for the purpose of Modvat credit on inputs.

Analysis: The cut tyres and tubes, though classified under sub-heading 4004.00, were held to remain waste and not manufactured goods. The classification did not alter their legal character. Once treated as waste, Rule 57D applied and the inputs used in producing such cut tyres and tubes could not be denied Modvat credit merely because the goods were cleared without duty under the exemption notification.

Conclusion: The issue was decided in favour of the assessee and against the Revenue. Modvat credit on the inputs was held admissible.

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