Modvat credit bars exemption for steel waste and scrap under Notification 171/88-C.E. when credit was already taken on input sheets.

Ferrous waste and scrap arising during manufacture of metal containers did not qualify for exemption under Notification No. 171/88-C.E. because the notification required that no Modvat credit be taken under Rule 56A or Rule 57A, and credit had admittedly been availed on the steel sheets from which the scrap arose. The scrap was therefore treated as arising from Chapter 72 goods, and the alternative characterisation as scrap arising from metal containers could not be used to bypass the credit bar. The exemption was accordingly unavailable and the claim failed.

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Issues: Whether waste and scrap of steel arising in the manufacture of metal containers was eligible for the benefit of Notification No. 171/88-C.E. dated 30-5-1988, and whether the availment of Modvat credit excluded such benefit.

Analysis: The notification granted exemption to ferrous waste and scrap only if the waste and scrap arose from goods covered by the specified clause and the credit of duty had not been taken under Rule 56A or Rule 57A of the Central Excise Rules, 1944. Steel sheets were goods covered by Chapter 72, and the waste and scrap had arisen during manufacture from those sheets. Since Modvat credit had admittedly been availed of on the steel sheets, the condition that no credit should have been taken was not satisfied. The waste and scrap could not be treated as arising from metal containers so as to shift it to the other clause of the notification.

Conclusion: The benefit of Notification No. 171/88-C.E. was not available, and the appeal failed.

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