Modvat credit bars scrap exemption under Notification No. 171/88-C.E.; waste and scrap remained dutiable.

Waste and scrap arising during manufacture of metal containers was not eligible for exemption under Notification No. 171/88-C.E. because the inputs used were duty-paid iron and steel sheets, strips and coils on which Modvat credit had already been taken. The notification was conditional, and its exemption was unavailable where Modvat or proforma credit had been availed on the inputs. As a result, the scrap remained liable to duty under the Modvat scheme, and the duty demand was upheld against the assessee.

---

---

Issues: Whether waste and scrap arising during manufacture of metal containers was eligible for exemption under Notification No. 171/88-C.E. when Modvat credit had already been availed on the duty-paid inputs.

Analysis: The waste and scrap arose in the course of manufacture from iron and steel sheets, strips and coils on which Modvat credit had been taken. The exemption under Notification No. 171/88-C.E. was conditional, and one of the conditions was that Modvat credit or proforma credit should not have been availed. Since the appellants had already availed the Modvat facility, the waste and scrap could not claim full exemption under the notification and had to bear duty liability in accordance with the Modvat scheme.

Conclusion: The exemption was not available, and the duty demand on the waste and scrap was upheld against the assessee.

---