Modvat credit on scrap inputs upheld where broad declaration covered the goods and no deliberate manipulation was proved.

Modvat credit was admissible where the assessee's declaration broadly covered the relevant tariff headings and included waste, scrap, defective products and mill roll products. The disputed goods were scrap in substance, and the addition of the abbreviation "def" did not alter their character. In the absence of material showing that the assessee altered the challan or otherwise manipulated the description, denial of credit was not supported by the record. On the same basis, the penalty was not sustainable. Minor variation in description does not defeat credit or justify penalty when the declaration substantially covers the goods and no deliberate misstatement is proved.

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Issues: Whether Modvat credit was admissible on the disputed inputs and whether the penalty imposed on the assessee was sustainable.

Analysis: The declaration filed by the assessee covered goods falling under the relevant tariff headings in broad and exhaustive terms, including waste, scrap, defective products and mill roll products. The disputed goods were scrap in substance, and the addition of the word "def" did not change their character. No material established that the assessee was responsible for any alteration in the challan, and the basis of denial of credit and penalty was therefore not supported by the record.

Conclusion: Modvat credit was admissible and the penalty was not sustainable.

Ratio Decidendi: Where the declaration substantially covers the goods and the disputed description still denotes scrap or defective scrap, minor variation in description does not justify denial of credit or penalty in the absence of proof of deliberate manipulation by the assessee.

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