Steel sheet cuttings used for melting were outside deemed credit coverage and treated as waste and scrap.

MS sheet cuttings used in the manufacture of MS ingots were examined under Government of India orders granting deemed credit on "steel sheets" of specified thickness. The text explains that although cuttings may loosely resemble sheets, they lose that character once used as cuttings for melting and further conversion into ingots. On that basis, the deemed credit and exemption scheme could not be extended to the cuttings, and they were treated as waste and scrap rather than eligible steel sheets.

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Issues: Whether MS sheet cuttings used in the manufacture of MS ingots were covered by the expression "steel sheets" in the Government of India orders granting deemed credit, and consequently whether such cuttings qualified for deemed Modvat credit or were liable to be treated as waste and scrap.

Analysis: The relevant Government of India orders granted deemed credit on steel sheets of specified thickness used as inputs in the manufacture of steel ingots. The lower authorities held that sheet cuttings were not covered because they were not sheets simpliciter and, once cut for melting into ingots, ceased to retain the character of sheets. The Tribunal accepted that while sheet cuttings may in some sense fall within the description of sheets, that character is lost when the material is used as cuttings for melting and further conversion into ingots. On that basis, the exemption and deemed credit scheme under the orders could not be extended to such inputs, and the departmental view that they were in the nature of waste and scrap was accepted.

Conclusion: The steel sheet cuttings used by the appellants were not covered by the expression "steel sheets" in the Government of India orders and did not qualify for deemed Modvat credit; they were rightly treated as waste and scrap.

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