Deemed MODVAT credit denied for scrap brass valves recognised as non-duty paid goods under Rule 57G(2).

Worn-out brass valves cleared as scrap for melting were held ineligible for deemed MODVAT credit under Rule 57G(2) because the scrap was recognisable as non-duty paid goods. The material had arisen from repeated use and was removed as scrap without payment of duty, so the credit claim could not be sustained and was rejected.

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Issues: Whether worn-out brass valves treated as scrap and supplied for melting were eligible for deemed MODVAT credit under Rule 57G(2) of the Central Excise Rules, 1944.

Analysis: Deemed MODVAT credit under Rule 57G(2) is unavailable where the inputs are recognisable as non-duty paid goods. The scrap in question had emerged from repeated use, was cleared as scrap without payment of duty, and was therefore not eligible for credit.

Conclusion: The claim for deemed MODVAT credit was rejected and the appeal failed.

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