Cenvat credit on job-worker capital goods allowed where final duty is discharged by the principal manufacturer.

Capital goods used by a job worker in manufacturing goods cleared without payment of duty remained eligible for Cenvat credit where duty was ultimately discharged by the principal manufacturer. The Tribunal applied its earlier line of authority treating job-work clearance as part of the integrated manufacture of the final dutiable product, and extended the same reasoning to capital goods. On that basis, the denial of credit was not sustainable and was set aside.

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Issues: Whether capital goods used by a job worker in the manufacture of goods cleared without payment of duty were eligible for Cenvat credit under the applicable Cenvat Credit Rules.

Analysis: The Tribunal noted that its earlier decisions had consistently held that goods manufactured on job work basis and cleared without payment of duty do not lose eligibility for credit where duty is ultimately discharged at the stage of the principal manufacturer. It followed the same line of reasoning for capital goods as well, treating the intermediate clearance as part of the integrated manufacture of the final dutiable product. On that basis, the Tribunal held that the impugned denial of credit could not be sustained.

Conclusion: The issue was decided in favour of the assessee, and the denial of Cenvat credit on the capital goods was set aside.

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