Deemed credit on old and used scrap was disallowed where the scheme applied only to specified inputs and contrary directions were ignored.

Deemed credit under the tariff scheme was confined to the specified category of inputs and did not extend to old and used waste and scrap of iron and steel purchased from the market. The Chapter 72 definition of waste and scrap, together with departmental clarification, supported that exclusion, so the credit claim was inadmissible. The assessee had also been expressly told not to avail the credit and was required to challenge that direction through the proper appellate route; continuing to use the credit could not be justified by a plea of bona fide belief. The disallowance of deemed credit was therefore upheld and the departmental order confirmed.

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Issues: Whether deemed credit was available on old and used waste and scrap of iron and steel, and whether the appellants could retain the credit taken despite departmental directions not to do so.

Analysis: The order granting deemed credit was intended for specified inputs covered by the tariff description, but the tariff scheme was held to apply to fresh scrap and not to old and used material purchased from the market. The definition of waste and scrap in Chapter 72 and the departmental clarification were treated as supporting that exclusion. The appellants had already been informed not to avail the credit and were expected to challenge that decision through the proper appellate remedy instead of continuing to use the credit. In those circumstances, the plea of bona fide belief was rejected.

Conclusion: Deemed credit was not admissible on old and used scrap, and the finding disallowing such credit was upheld against the assessee.

Final Conclusion: The appeal failed and the departmental order was confirmed.

Ratio Decidendi: Where the tariff and deemed credit scheme are confined to the specified category of inputs, credit cannot be claimed on excluded goods merely on a claim of bona fide belief, especially after express departmental directions to the contrary.

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