Modvat credit on job-work processing losses was upheld where inputs were lost at the job worker's premises.

Modvat credit was held admissible for inputs lost at the job worker's end during processing under a job-work arrangement. Inputs sent for processing under Rule 57F(2) of the Central Excise Rules, 1944, read with Notification No. 214/86-C.E., remained covered by the Modvat scheme even if the entire quantity did not return in processed form. The Tribunal accepted that processing losses and wastage arising at the job worker's premises did not, by themselves, justify denial of credit, and relied on earlier Tribunal rulings taking the same view. The credit claim was therefore allowed in favour of the assessee.

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Issues: Whether Modvat credit was admissible in respect of the quantity of inputs lost at the job worker's end during processing under the job-work arrangement.

Analysis: The inputs were sent for processing under Rule 57F(2) of the Central Excise Rules, 1944 read with Notification No. 214/86-C.E. The Tribunal held that the loss occurring during processing at the job worker's premises was covered by the Modvat scheme and that the credit could not be denied merely because the entire quantity of inputs did not return in processed form. The reasoning was supported by earlier Tribunal decisions allowing credit on processing losses and wastage arising at the job worker's premises.

Conclusion: The loss at the job worker's end did not justify denial of Modvat credit, and the issue was decided in favour of the assessee.

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