Cenvat credit on chlorine gas losses in manufacture upheld where input is duty-paid and used in the process.

Chlorine gas received for manufacturing remains eligible for Cenvat or Modvat credit even where part of the gas is inevitably lost, scrubbed, or left as residue during the process. The Court applied earlier Tribunal rulings on similar transactions and held that such quantity is still treated as used in or in relation to manufacture when the input is duty-paid and employed in the manufacturing operation. Finding no material factual distinction or contrary legal basis, the Court refused to disturb the credit claim and dismissed the appeal.

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Issues: Whether the remaining quantity of chlorine gas returned in cylinders, and the gas lost or escaped in the manufacturing process, could be treated as inputs used in or in relation to manufacture so as to sustain Cenvat or Modvat credit.

Analysis: The disputed facts were not seriously in issue, and the Court found the earlier Tribunal decisions on similar chlorine-gas transactions to be fully applicable. The reasoning accepted that where chlorine gas is received for manufacturing operations and a portion is inevitably lost, scrubbed, or remains as residue in the process, such quantity is still deemed to have been used in the manufacturing process. The Court saw no material distinction on facts, no contrary legal basis, and no reason to depart from the settled approach that duty-paid inputs used in the process are eligible for credit even if the entire quantity does not physically become part of the finished product.

Conclusion: The credit claim was not liable to be disturbed, and the appeal was dismissed.

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