Modvat credit on ship-breaking scrap upheld for duty shown on gate passes, despite the cited notification restriction.

Scrap generated from breaking imported ships was treated as eligible for Modvat credit at the higher amount shown in the gate passes, because prior Tribunal decisions consistently recognised credit equal to the duty paid on such scrap. The claimed entitlement was also supported by Notifications Nos. 62/90 and 60/90. The restriction said to arise under Notification No. 177/86 was held not to override that settled position, and the respondents were found entitled to the higher Modvat credit; the appeals were rejected.

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Issues: Whether scrap generated by breaking of imported ships was entitled to Modvat credit at the higher rate reflected in the gate passes and whether the restriction said to arise under Notification No. 177/86 applied.

Analysis: The Tribunal noted that there were several prior decisions consistently holding that scrap obtained from breaking ships imported into India is eligible for Modvat credit equal to the amount of duty paid on such scrap, as evidenced by the relevant gate passes. Reliance was also placed on Notifications Nos. 62/90 and 60/90 in support of the claim that such scrap should receive credit corresponding to the duty paid. In view of the settled Tribunal position, the restriction urged under Notification No. 177/86 did not prevail against the claimed entitlement.

Conclusion: The respondents were held entitled to the higher Modvat credit; the appeals were rejected and the common order was upheld.

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