Cenvat credit on furnace oil sent to a job worker for electricity generation was upheld despite non-excisable intermediate electricity.

Cenvat credit was admissible on furnace oil sent directly to a job worker for generation of electricity used in the manufacture of the final product. The rule permitted inputs to be sent out for processing or any other purpose and did not require prior receipt in the principal manufacturer's factory, provided the stipulated conditions were met. Credit could not be denied merely because the electricity generated was non-excisable. The job-work arrangement and use of fuel in relation to manufacture brought the input within the Cenvat scheme, so the credit denial and demand were unsustainable.

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Issues: Whether Cenvat credit was admissible on furnace oil sent directly to a job worker for generation of electricity, where the electricity was used in the manufacture of the appellant's final product.

Analysis: The relevant provisions permitted credit where inputs were sent to a job worker for further processing or for any other purpose and were received back within the stipulated period. The furnace oil was admittedly sent to the job worker, used for generating electricity, and the electricity was supplied back to the appellant within 180 days. The fact that electricity was not an excisable product did not matter because that was not a condition under the rule. The absence of prior physical receipt of the inputs in the appellant's factory also did not defeat credit when the inputs were sent outside for job work and the other conditions stood satisfied. The definition of inputs was wide enough to cover fuel used in or in relation to manufacture.

Conclusion: Cenvat credit on the furnace oil was admissible and the denial of credit was unsustainable.

Final Conclusion: The appeal succeeded and the demand was set aside because the job-work arrangement and use of the fuel for generation of electricity fell within the Cenvat credit scheme.

Ratio Decidendi: Inputs sent to a job worker for processing or any other purpose remain eligible for Cenvat credit when the statutory conditions are satisfied, and credit cannot be denied merely because the intermediate electricity generated is non-excisable or because the inputs were not first received in the principal manufacturer's factory.

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