Modvat credit and scrap clearance of empty drums do not attract duty when the prevailing Tribunal view treats removal as non-dutiable.

Empty metal drums cleared as scrap after Modvat credit had already been taken on the imported lubricating oil were treated as not dutiable. The Tribunal noted that the drums formed part of the imported goods on which CVD had been paid, and that the prevailing view after rehearing was that no excise duty was exigible on their subsequent removal as scrap. The demand was therefore unsustainable, and the duty liability on the empty drums was set aside.

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Issues: Whether duty was payable on empty metal drums cleared as scrap after Modvat credit had been taken on the imported goods in which the drums were received.

Analysis: The imported lubricating oil was received in metal drums and CVD was paid on the assessable value including the value of the drums. Modvat credit had been availed on the inputs under Rule 57A of the Central Excise Rules, 1944. The empty drums were later sold as scrap. The Tribunal noted that the earlier view relied upon by the Department had been recalled and, after rehearing, the contrary view favouring the assessee had been followed. It also noted that the later decisions had brought uniformity among the Benches that no duty was exigible on removal of such drums after credit had been taken.

Conclusion: Duty was not payable on the empty drums cleared after availing Modvat credit, and the demand was unsustainable.

Final Conclusion: The assessee succeeded and the duty demand on the empty drums was set aside.

Ratio Decidendi: Where empty drums are cleared after Modvat credit has already been availed on the inputs received in those drums, and the prevailing Tribunal view is that such removal is not dutiable, no duty can be demanded on their clearance as scrap.

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