Credit reversal on damaged packing material during packing was not required where the goods remained within the manufacturing process.

Credit was not required to be reversed on packing material damaged during the packing process and cleared at a nominal value, because the material was not removed as such and had not remained unused before issue for packing. The damage occurred in the course of manufacturing activity, so the material could not be treated as outside the manufacturing process. Rule 57D supported the assessee's position, and the reasoning of the lower appellate authority that no reversal was warranted was affirmed.

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Issues: Whether credit was required to be reversed in respect of packing material damaged during the packing process and cleared at a nominal value.

Analysis: The damaged packing material was not removed as such and was not a case of inputs remaining unused before issue for packing. The damage occurred during the course of packing, and such material could not be treated as outside the manufacturing process. In these circumstances, the reasoning of the lower appellate authority that no reversal of credit was warranted was found to be correct, and Rule 57D supported the assessee's stand.

Conclusion: Credit reversal was not required and the issue was decided in favour of the assessee.

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