K.S. Venkataramani, Member (T)

1. This appeal is directed against the order dated 4.12.1987 passed by the Collector of Central Excise, Hyderabad by which he had directed under Rule 571 of the Central Excise Rules, 1944 that the appellants should reverse the MOD VAT credit amount of Rs. 1,49,936.14 because this was availed of irregularly. He also imposed a penalty of Rs. 5,000/- on the appellants under Rule 173Q of the Central Excise Rules.

2. The facts in brief are that the appellants manufactured steel ingots with the aid of electric induction furnace. They also manufactured other Articles viz. runners and risers. The raw material for manufacture of these goods, among others, is steel scrap. They filed a declaration on 5.6.1986 opting for Modvat facility in respect of steel scrap as an input for their final product. The Central Excise Officers on a visit to the appellants' factory on 16-1-1987 noticed that a quantity of 2685.895 MT of steel scrap had been taken for manufacture of steel ingots, runners and risers and the quantity of final product obtained was 2206.731 MT of ingots and 79.234 MT of runners and risers. A total credit of Rs. 10,07,099.67ps was availed as Modvat cre