Input credit and job-worker loss: waste arising during manufacturing process does not justify denial in principle, subject to quantum on remand.

Credit on aluminium ingots sent to a job worker could not be denied merely because material was lost during melting and casting at the job worker's premises. Rule 57D was applied on the basis that waste, refuse or by-products arising in the course of manufacture do not justify denial or variation of input credit, and the job worker's activities formed part of the manufacturing process. The contrary departmental authority was found unhelpful. However, the actual extent of permissible loss had not been examined, so the matter required remand for determination of the correct quantum of loss by the adjudicating authority.

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Issues: Whether credit on aluminium ingots sent to a job worker under Rule 57F(3) could be denied to the extent of loss of material arising during melting and casting, and whether such loss at the job worker's premises was covered by Rule 57D.

Analysis: Rule 57D prevents denial or variation of credit in respect of inputs contained in waste, refuse, or by-products arising during manufacture. The activities undertaken by the job worker were part of the manufacture of the final product, and therefore waste arising in the job worker's premises was also waste arising in the course of manufacture. The rule was held applicable to such waste, and the department's reliance on contrary authority was found not to assist its case. However, the adjudicating and appellate authorities had not examined the actual extent of the loss, having proceeded on the erroneous view that the loss was not allowable.

Conclusion: Credit could not be denied in principle for the loss arising at the job worker's premises, but the matter required determination of the exact quantum of permissible loss by the adjudicating authority on remand.

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