Job-work credit reversal not required for scrap and waste generated at the job worker's premises

Under the job-work provisions, proportionate MODVAT/CENVAT credit attributable to inputs forming waste and scrap generated at the job worker's premises did not have to be reversed merely because such waste or scrap was not received back. The Tribunal noted that the relevant rules required only the inputs sent for job work to be returned within the prescribed period and did not impose any express condition for return of scrap generated during processing. It also relied on the Board's clarification and the deletion of the earlier scrap-return requirement from the later CENVAT regime. The assessee was therefore not liable to reverse the credit.

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Issues: Whether proportionate MODVAT/CENVAT credit attributable to inputs contained in waste and scrap generated at the job-worker's premises, and not received back, was required to be reversed under the applicable job-work provisions.

Analysis: The relevant job-work rules required inputs sent to a job worker to be received back within the prescribed period, but contained no stipulation requiring return of waste and scrap generated during the job-work process. The omission of any such requirement, coupled with the Board's clarification, indicated that credit could not be denied merely because scrap or waste generated at the job-worker's premises was not returned along with the finished goods. The Tribunal also relied on the fact that the earlier requirement regarding return of waste and scrap had been deleted and was not reintroduced in the later CENVAT regime.

Conclusion: The assessee was not required to reverse CENVAT credit attributable to waste and scrap generated at the job-worker's premises and not received back.

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