Modvat credit reversal on machining waste prevents repeat duty demand where prescribed procedure is followed.

Duty on waste arising during machining of forgings was found not payable where the work was carried out under Rule 57F(2) and the supplier had debited the Modvat credit relatable to that waste. The governing principle applied was that valid reversal or debit of the credit satisfies the exemption requirement, so duty cannot be demanded again on the same waste. On that basis, the duty demand was held unsustainable, the assessee succeeded, and consequential relief followed.

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Issues: Whether duty was payable on waste arising during machining of forgings when the work was carried out under Rule 57F(2) and the Modvat credit relatable to the waste had been debited by the supplier.

Analysis: The appellants followed the procedure under Rule 57F(2). The record showed that the supplier of the forgings had debited the Modvat credit attributable to the waste arising in the machining process. In such circumstances, the matter was governed by the principle that reversal of Modvat credit satisfies the requirement for availing the exemption, and duty demand on the waste could not be sustained.

Conclusion: The duty demand on the waste was unsustainable and the finding was in favour of the assessee.

Final Conclusion: The appeal succeeded and the duty demand was set aside with consequential relief.

Ratio Decidendi: Where Modvat credit relatable to the waste is validly reversed or debited in accordance with the prescribed procedure, duty cannot be demanded again on the same waste.

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