Cenvat credit on job work inputs is admissible when processed goods are returned without duty and not treated as exempted goods.

Cenvat credit was held admissible on inputs used in job work where the processed goods were returned without payment of duty under Rule 4(5)(a) of the Cenvat Credit Rules, 2001. The Tribunal applied the Larger Bench view that such inputs are not treated as inputs used in exempted goods merely because the final products are cleared without duty after job work. Credit could therefore not be denied on that basis, and the assessees were entitled to avail Cenvat credit on the duty paid inputs used for the job work activity.

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Issues: Whether Cenvat credit was admissible on inputs used in job work where the processed goods were returned without payment of duty, and whether such inputs could be treated as having been used in exempted goods.

Analysis: The appellants had received materials for job work and returned them without payment of duty in accordance with Rule 4(5)(a) of the Cenvat Credit Rules, 2001. They also used certain inputs received directly for the same job work and took credit of the duty paid on those inputs. The Tribunal applied the Larger Bench decision holding that inputs used in manufacture of final products cleared without payment of duty after job work are not to be regarded as inputs used in exempted goods, and therefore credit cannot be denied on that basis.

Conclusion: The appellants were entitled to Cenvat credit on the inputs used for the job work activity.

Ratio Decidendi: Inputs used in the manufacture of goods cleared without payment of duty after job work are not treated as inputs used in exempted goods for the purpose of denying Cenvat credit.

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