Cenvat credit on inputs lost in manufacture cannot be denied merely because they are not found as such.

Rule 57H allows credit for inputs in stock, for inputs received after declaration, and for inputs used in manufacturing final products cleared on or after the relevant date. Credit cannot be denied merely because the inputs were already received before filing the declaration if they were subsequently used in manufacture. The premise that credit is available only when inputs remain as such, or are identifiable in stock or finished goods, is incorrect. Rule 57D also prevents denial of credit simply because inputs are lost, or appear in waste, by-products or other residual forms during the manufacturing process. Credit was therefore available despite loss of the inputs during conversion.

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Issues: Whether credit under Rule 57H could be denied on the portion of inputs received before filing the declaration under Rule 57G merely because such inputs were lost during the process of conversion into the finished product.

Analysis: Rule 57H permits credit in respect of inputs lying in stock, received after declaration, and also inputs used in the manufacture of final products cleared on or after the relevant date. The denial was based on the premise that credit is admissible only on inputs as such or as contained in stock or finished goods. That premise was incorrect. Rule 57D further provides that credit is not to be denied merely because the inputs are contained in waste, by-products or similar residual forms arising in the manufacturing process.

Conclusion: Credit could not be denied on the ground that the inputs were lost during conversion, and the assessee was entitled to the credit.

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