Cenvat credit on escaped gases upheld where loss occurred during manufacture and Rule 57D protected the input credit

Credit of duty on gases escaped during the filling of cylinders was treated as admissible under Rule 57D because the loss occurred during the course of manufacture, not before manufacture began. The view that only waste with a visible identity or separate physical form could fall outside Rule 57D was rejected. Inputs lost by spillage or evaporation were regarded as still having physical existence for credit purposes, and credit was not denied merely because part of the input did not remain in the finished product. On that basis, the assessee was not required to reverse the credit.

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Issues: Whether credit of duty paid on gases that escaped into the atmosphere during the filling of cylinders was admissible as relating to waste under Rule 57D.

Analysis: The escaped gases were lost during the course of manufacture and not before manufacture commenced. The reasoning that only waste with visible identity or separate physical form could fall outside Rule 57D was rejected. Goods lost by spillage or evaporation were treated as still having physical existence, and the authority relied on the view that credit on inputs is not denied merely because some quantity is not contained in the finished product. The earlier authorities cited against the assessee were held inapplicable on the facts.

Conclusion: The escaped gases were covered by Rule 57D and the assessee was not required to reverse the credit.

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