Modvat credit on rejected steel consignments upheld where the department failed to prove the goods were scrap.

Modvat credit was upheld on consignments received as rounds of non-alloy steel because the goods were treated as rejected consignments sold to the respondent after the original consignees endorsed them as not meeting specifications. The record did not show that the consignees had altered the goods' shape or size, and the department failed to support its claim that the goods were in substance scrap. On that evidence, there was no adequate basis to disturb the finding that the goods remained rounds rather than scrap, so credit remained admissible.

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Issues: Whether the respondent was entitled to Modvat credit on consignments received as rounds of non-alloy steel, or whether the goods were in substance scrap so as to disentitle credit.

Analysis: The consignments were endorsed by the original consignees as not conforming to the ordered specifications and were sold to the respondent after rejection. The record did not show that the consignees had worked upon the goods to alter their shape or size. The department's assertion that the goods received were scrap rather than rounds was unsupported by material, and no adequate basis was shown to disturb the finding that the goods were rejected consignments sold to the respondent.

Conclusion: The respondent's entitlement to Modvat credit was upheld and the department's challenge failed.

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