Cenvat credit remains admissible for inputs ending up in waste or scrap during manufacture, preventing reversal or denial.

Cenvat credit on duty-paid inputs is not required to be reversed merely because part of those inputs is contained in waste, refuse, by-product or scrap arising during manufacture. Rule 57D of the Central Excise Rules, 1944, read with the Board's circular dated 03.04.2000, clarifies that such credit remains admissible where the inputs are used in or in relation to manufacture of final products. On this basis, demand, interest and penalty were treated as unsustainable, and the appellate relief followed.

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Issues: Whether Cenvat credit taken on inputs contained in waste and scrap arising during manufacture was required to be reversed or denied for the relevant period.

Analysis: Rule 57D of the Central Excise Rules, 1944 provided that credit shall not be denied or varied merely because part of the inputs is contained in waste, refuse or by-product arising during manufacture, or because the inputs have become waste during the course of manufacture. The Board's Circular dated 03.04.2000 clarified that Cenvat credit is admissible in respect of inputs contained in waste, refuse or by-product and that credit should not be denied where inputs are used in or in relation to manufacture of final products. The same view had also been applied in the cited Tribunal decision.

Conclusion: The appellant was not required to reverse the credit on inputs contained in waste and scrap, and the demand, interest and penalty were unsustainable.

Final Conclusion: The appeal succeeded and the impugned order was set aside with consequential relief.

Ratio Decidendi: Credit on duty-paid inputs is not to be denied or reversed merely because a part of those inputs emerges as waste, refuse or by-product during manufacture, where the governing rule and clarification permit such credit.

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