Input credit under Rule 57H remains available despite invisible process loss during manufacture

Rule 57H of the Central Excise Rules allows credit on inputs used in manufacture, and the credit is not contingent on the inputs physically remaining identifiable in the finished product. Inputs consumed through invisible process loss during production do not lose eligibility merely because they do not appear in the final goods. On that basis, denial of credit on the ground of invisible process loss was unsustainable, and credit under Rule 57H was allowable.

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Issues: Whether credit under Rule 57H of the Central Excise Rules could be denied merely because the inputs were lost in the manufacturing process and did not physically remain in the final product.

Analysis: Rule 57H permits credit on inputs lying in stock and on inputs used in the manufacture of final products cleared on or after the relevant date. The provision does not make credit contingent on the inputs remaining identifiable in the finished goods. Inputs consumed through invisible process loss during manufacture do not cease to qualify where they are used in the production process itself.

Conclusion: The denial of credit on the ground of invisible process loss was unsustainable and the credit under Rule 57H was allowable in favour of the assessee.

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