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Issues: Whether waste and scrap of copper and aluminium generated during manufacture from duty-paid inputs remained eligible for exemption under the relevant notifications despite availing of Modvat credit on the inputs.
Analysis: The waste and scrap arose in the course of manufacturing motor vehicle parts from duty-paid copper and aluminium inputs on which Modvat credit had been taken. The applicable exemption notifications granted nil-rate treatment to waste and scrap manufactured from duty-paid inputs. Rule 57F was relied on by the Revenue to contend that clearance of such waste and scrap required payment of duty, but the Tribunal held that the taking of Modvat credit did not by itself make the inputs cease to be duty paid for the purposes of the exemption notifications. The amendment introduced later by Notification No. 246/87-C.E. was held to operate prospectively and could not be treated as retrospectively curative for the earlier period.
Conclusion: The waste and scrap was entitled to exemption under the applicable notifications and the assessee was not required to deny the benefit merely because Modvat credit had been availed on the inputs.
Final Conclusion: The appeal succeeded and the duty demand was set aside in favour of the assessee.
Ratio Decidendi: Availment of Modvat credit on duty-paid inputs does not, by itself, deprive waste and scrap generated from those inputs of exemption under notifications that grant nil-rate treatment to waste and scrap manufactured from duty-paid inputs, and a later amending notification cannot be given retrospective effect in the absence of express language.
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