Modvat credit on job-worker waste denied where dross was not returned and melting loss was not proved.

Modvat credit on aluminium inputs short received back from a job worker was not admissible where the waste and dross generated at the job worker's premises were not returned to the assessee as required under Rule 57F(5)(i). The claimed melting loss was rejected because the certificate produced did not satisfactorily prove the extent of loss and had been obtained only after the show cause notice. Rule 57D(1) was held inapplicable on these facts because the waste arose in the job worker's premises and had to be brought back to the assessee. The credit reversal demand was therefore upheld in favour of the Revenue.

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Issues: Whether Modvat credit was admissible on aluminium inputs short received back from the job worker when the waste and dross generated in the job worker's premises was not returned to the appellants under Rule 57F(5)(i).

Analysis: The return of waste in the form of dross from the job worker's premises was mandatory under Rule 57F(5)(i). The claimed melting loss was not accepted, as the certificate produced did not satisfactorily establish the extent of loss and had been procured only after the issuance of the show cause notice. The waste arose in the job worker's premises and was required to be brought back to the appellants, so Rule 57D(1) had no application on the facts.

Conclusion: Modvat credit on the short received inputs was rightly denied, and the demand to reverse the credit was upheld in favour of the Revenue.

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