Cenvat credit on quality-control sample inputs remains available where testing is integral to pharmaceutical manufacture and compliant records are maintained.

Cenvat credit could not be denied on inputs drawn as samples for quality control testing in pharmaceutical manufacture, because quality testing formed an integral part of the manufacturing process and the records showed compliance with the Drugs and Cosmetics regime and applicable manufacturing standards. The inputs were used for mandatory quality control purposes, with retained samples and testing facilities maintained as required, and their later destruction did not disqualify the credit. Accordingly, the sample inputs used for testing remained eligible for Cenvat credit.

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Issues: Whether Cenvat credit could be denied on inputs drawn as samples for quality control testing and required to be destroyed in the course of pharmaceutical manufacturing.

Analysis: The inputs were drawn for quality control as part of the manufacturing process in a pharmaceutical unit subject to the requirements of the Drugs and Cosmetics regime and the relevant manufacturing standards. The records and notification relied upon showed that the manufacturer was required to maintain quality control facilities and retained samples, and that the sample inputs were not irregularly dealt with. Quality testing was treated as an integral step in manufacture, and the inputs used for that purpose were not excluded from credit merely because they were later destroyed.

Conclusion: Cenvat credit could not be denied to the assessee on the sample inputs used for quality control testing.

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