Cenvat credit on furnace oil used in job-work manufacture remains admissible where finished goods move to the principal without duty at that stage.

Cenvat credit on furnace oil used as fuel in job-work manufacture was held admissible where the finished goods were cleared to the principal manufacturer under Notification No. 214/86-C.E. without duty payment at that stage. The Tribunal treated such goods as not finally exempted, since duty would be paid on subsequent clearance, and followed the settled principle that credit is not denied where inputs are used in manufacturing dutiable goods or for generating steam. Denial of credit was therefore unsustainable.

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Issues: Whether Cenvat credit on furnace oil used as fuel in the manufacture of goods on job work basis was admissible when the resultant goods were cleared under challan without payment of duty.

Analysis: The Tribunal noted that the goods manufactured on job work basis were cleared to the principal manufacturer under Notification No. 214/86-C.E. and were not exempted goods in the final sense, as duty would ultimately be paid on their clearance. It further relied on the settled position that inputs used for generating steam or for use in the manufacture of dutiable as well as exempted goods do not attract denial of credit, and that credit remains available where inputs are used in job work and the finished goods are cleared without duty to the principal manufacturer.

Conclusion: The Cenvat credit was admissible, and the denial of credit was unsustainable.

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