Job-worked goods cleared without duty do not attract exempted-goods restrictions on CENVAT credit; non-received inputs remain ineligible.

CENVAT credit on inputs and capital goods used by a job worker in goods cleared to the principal manufacturer without payment of duty was held admissible, because such goods were not treated as exempted or nil-rated goods for denying credit and duty was ultimately discharged at the principal manufacturer's stage. The denial of credit on that issue was set aside. Credit taken on inputs not received in the factory was also examined on admitted non-receipt and prior reversal by the assessee; on those facts, the denial was sustained. The assessee received partial relief, succeeding on the job-work credit dispute but failing on the separate claim for non-received inputs.

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Issues: (i) Whether CENVAT credit on inputs and capital goods used by a job worker in the manufacture of goods cleared to the principal manufacturer without payment of duty was admissible under the CENVAT Credit Rules, 2004. (ii) Whether credit of duty taken on inputs not received in the factory was rightly denied.

Issue (i): Whether CENVAT credit on inputs and capital goods used by a job worker in the manufacture of goods cleared to the principal manufacturer without payment of duty was admissible under the CENVAT Credit Rules, 2004.

Analysis: The issue was held to be governed by earlier Tribunal decisions that treated job-worked goods cleared without payment of duty to the principal manufacturer as not being exempted goods or goods chargeable to nil rate of duty for the purpose of denying credit. The reasoning proceeded on the basis that duty on such goods is ultimately paid at the principal manufacturer's end, and that the relevant credit provisions were materially pari materia with the earlier rules considered in those decisions. Accordingly, the bar against credit on exempted goods was held inapplicable.

Conclusion: The credit was admissible and the finding of denial of credit on this issue was set aside in favour of the assessee.

Issue (ii): Whether credit of duty taken on inputs not received in the factory was rightly denied.

Analysis: The non-receipt of the inputs was admitted, and the credit had already been reversed by the assessee. On those facts, the denial of the credit by the lower authorities was sustained.

Conclusion: The denial of credit on this issue was upheld against the assessee.

Final Conclusion: The appeals succeeded on the principal CENVAT credit dispute relating to job-worked goods, but failed on the separate credit claim concerning inputs not received, resulting in a partial relief to the assessee.

Ratio Decidendi: Goods cleared by a job worker to the principal manufacturer without payment of duty are not to be treated as exempted or nil-rated goods for denying CENVAT credit where the duty is ultimately discharged at the principal manufacturer's stage.

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