MODVAT credit on exempt scrap goods raised a recurring legal question, and the reference to the High Court was accepted.

Divergent Tribunal views on deemed MODVAT credit for exempt waste and scrap of copper and aluminium led to a reference on whether such inputs could still be treated as clearly recognisable as non-duty paid goods under Rule 57G(2) of the Central Excise Rules. The Tribunal noted conflicting interpretations on the effect of exemption notifications within the MODVAT scheme and treated the recurring legal question as suitable for higher judicial determination. The request for reference was accordingly accepted, and the question of law was referred to the High Court.

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Issues: Whether the question of law arising from denial of deemed MODVAT credit on exempt waste and scrap of copper and aluminium, in the face of divergent Tribunal views, should be referred to the High Court.

Analysis: The dispute turned on whether inputs that had been exempted under the relevant notifications could be treated as clearly recognisable as non-duty paid for the purpose of Rule 57G(2) of the Central Excise Rules. The Tribunal noticed that different Benches had taken conflicting views on the meaning of non-duty paid goods and on the effect of exemption notifications in the MODVAT scheme. In view of the divergence in approach and the recurring legal question, the plea for reference was accepted.

Conclusion: The question of law was referred to the High Court for decision, accepting the applicants' request on that issue.

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