Modvat credit on input waste during job-worker repacking remains admissible where wastage arises in relation to manufacture.

Modvat credit was admissible on shampoo input waste lost during repacking at a job worker's premises, because the wastage occurred in the course of and in relation to manufacture of the final retail-pack product. Rule 57D(1) of the Central Excise Rules, 1944 permitted credit on such input waste at the material time, and Tribunal precedents supported that position. The departmental circular did not alter the entitlement to credit. On that basis, a demand raised under Rule 57-I was not sustainable.

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Issues: Whether Modvat credit was admissible on the 2% quantity of shampoo lost as waste during repacking at the job worker's premises.

Analysis: The disputed shortage arose during repacking undertaken by job workers, and the wastage occurred in the course of, and in relation to, manufacture of the final retail-pack product. Rule 57D(1) of the Central Excise Rules, 1944 permitted credit in respect of such input waste at the material time. The cited Tribunal decisions supported the same legal position, though the departmental circular did not alter that entitlement.

Conclusion: Modvat credit was admissible on the 2% input waste, and the demand raised under Rule 57-I was not sustainable.

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