Input material classification in galvanising process upheld; defective coils were not waste and scrap for MODVAT purposes.

Defective cold rolled coils removed after cleaning and inspection during galvanising were treated as input material, not as waste and scrap generated in manufacture. The material did not meet IS specifications and required further cleaning before any usable portion could be taken for galvanisation, but that process did not change its character into scrap. The Tribunal followed its earlier view relied on by the Revenue and rejected the assessee's waste-and-scrap argument. Reversal of MODVAT credit and the duty demand were upheld because the removed goods continued to be cold rolled coils/input material.

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Issues: Whether defective cold rolled coils, removed after cleaning and inspection during the galvanising process, were to be treated as waste and scrap or continued to remain inputs liable to reversal of MODVAT credit and duty under the relevant excise rules.

Analysis: The material was found not to be IS-specification compliant and required cleaning by water, hydrochloric acid, and compressed air before any part fit for galvanisation could be used. The Tribunal held that the goods removed were not waste and scrap generated in the course of manufacture, but continued to be cold rolled coils/input material. On that basis, the case was treated as covered by the earlier Tribunal view relied upon by the Revenue, and the appellants' reliance on waste-and-scrap treatment was rejected.

Conclusion: The defective material was not waste and scrap and remained input material; reversal of credit and duty demand were upheld against the assessee.

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