Cenvat credit on input in manufacturing scrap remains admissible despite job worker SSI exemption and no duty on scrap

Cenvat credit remains admissible on input contained in scrap, waste, refuse or by-product generated during manufacture, because the decisive factor is the presence of input left in the scrap, not where the scrap arises. The fact that the scrap was generated at a job worker's premises and that the job worker availed SSI exemption does not by itself defeat credit, especially where the scrap is produced in the course of manufacture. On this basis, denial of credit on such scrap is unsustainable.

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Issues: Whether Cenvat credit on the input contained in scrap generated at the job worker's premises was admissible when the job worker was availing SSI exemption and no duty was paid on such scrap.

Analysis: The Circular clarified that credit is admissible on the input contained in waste, refuse or by-product generated during manufacture. The fact that the scrap arose at the job worker's end and that the job worker availed SSI exemption did not alter the admissibility of credit, since the decisive factor was that the scrap represented input remaining contained in waste and scrap generated in the course of manufacture.

Conclusion: Cenvat credit on the input contained in scrap generated at the job worker's premises was admissible, and the denial of credit was unsustainable.

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