Cenvat credit reversal not required for job-work scrap within input-output norms and duty-paid waste clearance.

Pro-rata reversal of Cenvat credit was held unwarranted where the short receipt of processed inputs from job workers reflected wastage or scrap arising during job work. The shortage was within prescribed input-output norms, supported by work orders and job-work permission, and the job workers had discharged duty on clearance of waste and scrap. Following its earlier view, the Tribunal treated credit as admissible even where inputs were contained in waste, refuse, or by-products generated in processing. The departmental demand was therefore not sustainable.

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Issues: Whether pro-rata Cenvat credit was required to be reversed in respect of the short receipt of processed inputs returned from job workers, where the shortage represented wastage or scrap generated in the course of job work.

Analysis: The shortage was found to be within the prescribed standard input-output norms and was supported by the work orders and the permission granted for job work. The record also indicated that the job workers had discharged duty on clearance of waste and scrap. The Tribunal followed its earlier view that, where waste or scrap arises at the job worker's end in the course of processing, the principal manufacturer is not liable to reverse credit merely because such waste or scrap is not returned. The departmental demand was also inconsistent with the clarification that credit remains admissible in respect of inputs contained in waste, refuse, or by-products.

Conclusion: Pro-rata reversal of Cenvat credit was not warranted, and the demand could not be sustained.

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