Modvat credit on unavoidable process loss in liquid carbon dioxide storage and handling cannot be denied under Rule 57D.

Modvat credit could not be denied on liquid carbon dioxide lost as process loss during storage, transfer and cylinder filling, because the wastage arose from the nature of the commodity and the manufacturing process, including spillage, pipeline loss, handling loss, evaporation, pressure venting, valve defects and recycling operations. Such unavoidable loss was treated as process loss in the course of use of inputs in or in relation to the final product, and Rule 57D of the Central Excise Rules, 1944 protected credit for that loss. Credit on the disputed quantity was therefore allowed and the Revenue's appeal failed.

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Issues: Whether Modvat credit could be denied on the quantity of liquid carbon dioxide gas lost as process loss during storage, transfer and filling of cylinders.

Analysis: The loss arose from the nature of the commodity and the manufacturing process, including spillage, pipeline loss, handling loss, evaporation, pressure-related venting, valve defects and recycling operations. Such wastage was treated as process loss in the course of use of inputs in or in relation to the final product. Rule 57D of the Central Excise Rules, 1944 protected credit in respect of such unavoidable losses, and the cited circular also supported the view that these losses did not justify denial of credit.

Conclusion: Modvat credit was not liable to be denied on the disputed quantity of losses, and the appeal of the Revenue failed.

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