Modvat credit admissibility upheld where scrap and cutting inputs were covered by the declaration and clarificatory letter

Modvat credit was found admissible on inputs described as rejects or scrap because the Rule 57G declaration already covered scrap, waste of all kinds and cutting material, including cuttings received as scrap under Chapter 72. A clarificatory letter filed in response to departmental queries supplied further particulars and was treated as part of the declaration, so the objection that the inputs were not properly declared was rejected. The declared scope was held to cover the goods in question, and the demand and penalty could not be sustained.

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Issues: Whether Modvat credit was admissible on the disputed inputs when the declaration under Rule 57G(1) of the Central Excise Rules was said to be incomplete or not specific enough to cover the goods received as rejects or scrap.

Analysis: The disputed goods were described in the invoices as rejects, which were treated as scrap. The declaration already covered scrap, waste of all kinds, and cutting material, and also included all kinds of cutting received as scrap under Chapter 72. The clarificatory letter filed by the assessee in response to departmental queries furnished further particulars of the scrap and cuttings received. On that basis, the letter was treated as part of the declaration and the objection that the inputs were not declared was not accepted.

Conclusion: Modvat credit on the disputed inputs was held to be admissible, and the issue was decided in favour of the assessee.

Final Conclusion: The demand and penalty could not be sustained because the declared scope of inputs covered the goods in question.

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