Cenvat credit on furnace oil used in job-work manufacture remains admissible; refund of reversed credit is not barred by unjust enrichment.

Fuel used as an input in manufacturing remains eligible for Cenvat credit even where the finished goods are cleared on a job-work basis, because the credit scheme covered such use and the relevant rule excluded fuel from reversal. The earlier Modvat authorities did not control the issue, so denial of credit and insistence on reversal were not justified. A refund of reversed input credit is not barred by unjust enrichment unless the passing on of that incidence is shown; in the absence of such a finding, the doctrine does not apply. The credit was therefore to be restored and the refund rejection could not stand.

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Issues: (i) whether Cenvat credit on furnace oil used as input in the manufacture of goods cleared on job-work basis could be denied and the reversal of such credit sustained; (ii) whether the refund claim of the reversed credit was barred by the doctrine of unjust enrichment.

Issue (i): whether Cenvat credit on furnace oil used as input in the manufacture of goods cleared on job-work basis could be denied and the reversal of such credit sustained.

Analysis: The input was used in relation to manufacture of excisable goods, including goods manufactured on job-work basis. The relevant credit scheme under the Cenvat Credit Rules, 2002 was construed as permitting credit on such fuel, and Rule 6(2) specifically excluded fuel from the reversal requirement. The earlier Modvat-based decisions relied upon below did not govern the point in issue. On that construction, the department's insistence on reversal was not justified.

Conclusion: The appellant was entitled to retain the credit on furnace oil and the reversal was not called for.

Issue (ii): whether the refund claim of the reversed credit was barred by the doctrine of unjust enrichment.

Analysis: The refund related to input credit and not to a duty incidence passed on in the ordinary course. No finding was recorded to show that the incidence of the reversed credit had been passed on, and the doctrine of unjust enrichment was held not applicable to such refund.

Conclusion: The refund claim was not hit by unjust enrichment.

Final Conclusion: The credit was directed to be restored in the assessee's accounts, and the impugned rejection of refund could not stand.

Ratio Decidendi: Where fuel qualifies as input under the Cenvat scheme and the governing rule excludes such fuel from reversal, credit cannot be denied merely because the final goods are manufactured on job-work basis; a refund of reversed input credit is not defeated by unjust enrichment unless passing on of the incidence is established.

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