A user noticed that the arc furnace wouldn't refund their iron sword, I looked into it and found that while the arc furnace will resmelt metal tools as intended, it will only do so when they are at full durability, it will not smelt the tools/armor at all if they have taken any damage, which goes against the entire point of the feature.

Picture shows that while the damaged tools will not smelt, the undamaged ones will.

I also checked to see if it was due to an inability to calculate for losing one point of durability, but it seems to not matter.

Another issue to note is that damaged tools cannot be manually placed into the arc furnace and must be inputed via the input, likely because it doesn't register as a recipe due to the issue above.

Running Forge 1.12.2-14.23.4.2730. I had uninstalled mods mid testing, but the issue still persisted while I only had IE installed. (second picture is after uninstalling). Modlist before I uninstalled them:

If i remeber right, you never could smelt damaged equipment

Yeah you could, and it should work.
Dunno what changed to break it, I'll take a look