CENVAT credit on capital goods sent for further processing to a job worker is available when return and documentation conditions are met.

Capital goods sent to a job worker for further processing fell within Rule 57AC(5)(a), provided they were returned within 180 days and the movement was supported by proper records and documents. The phrase "further processing" was read in line with manufacture under Section 2(f) of the Central Excise Act, 1944, so any process undertaken to complete manufacture was covered. A narrow interpretation excluding such movement was held inconsistent with Circular No. 637/28/2002-CX, which recognised removal of capital goods to a job worker's premises for manufacturing processes. On that basis, CENVAT credit was available.

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Issues: Whether capital goods sent to a job worker for further processing fell within Rule 57AC(5)(a) so as to permit CENVAT credit when the goods were returned within the prescribed time.

Analysis: Rule 57AC(5)(a) allowed inputs or capital goods to be sent to a job worker not only for testing, repair or reconditioning, but also for further processing or any other purpose, provided the goods were received back within 180 days and the movement was supported by records and documents. The expression "further processing" was read in the context of manufacture under Section 2(f) of the Central Excise Act, 1944. Any process undertaken to complete manufacture was held to fall within the rule. The restrictive reading adopted by the Commissioner (Appeals) was also found inconsistent with Circular No. 637/28/2002-CX dated 08.05.2002, which recognised removal of capital goods to a job worker's premises for carrying out manufacturing processes.

Conclusion: The removal of capital goods to the job worker for further processing was covered by Rule 57AC(5)(a), and the assessee was entitled to the credit.

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