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Issues: Whether Modvat credit accumulated on inputs used in manufacture of one set of final products could be utilised for payment of central excise duty on waste and scrap arising in the manufacture of other products, in the light of Rule 57F(4)(ii) read with Rule 57F(5)(a) of the Central Excise Rules, 1944.
Analysis: The operative words in Rule 57F(4)(ii) permit utilisation of credit allowed in respect of any inputs towards payment of duty on waste arising in the course of manufacture of the final products. Rule 57F(5)(a) similarly provides that waste arising from processing of inputs, in respect of which credit has been taken, may be removed on payment of duty as if such waste were manufactured in the factory. The provision was read as not being confined only to inputs used in a declared final product cleared on payment of duty, but extending to any inputs in respect of which credit had been validly taken, where waste arose during manufacture. On the admitted facts, the same inputs were involved and the credit had accumulated because the corresponding product was exported or exempt, while the scrap became dutiable.
Conclusion: The assessee was entitled to use the accumulated Modvat credit for payment of duty on the scrap and waste, and the denial of credit could not be sustained.
Ratio Decidendi: Where Rule 57F(4)(ii) and Rule 57F(5)(a) apply, Modvat credit taken on inputs may be utilised for duty on waste arising from those inputs, unless the rules expressly prohibit such utilisation.
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