Cenvat credit on job-work inputs allowed where final goods were meant for dutiable clearance by the principal manufacturer.

Cenvat credit on furnace oil used in job-work manufacture under Notification No. 214/1986-C.E. cannot be denied where the arrangement is undertaken on the footing that the principal manufacturer will clear the final products on payment of duty. The appellate authority's denial based only on a doubt about whether duty was actually paid was unsustainable because the notification scheme itself contemplates dutiable clearance by the principal manufacturer, and no finding of non-payment was recorded. Credit was therefore admissible.

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Issues: Whether Cenvat credit on furnace oil used in job-work manufacture was admissible when the job work was undertaken under Notification No. 214/1986-C.E. and the principal manufacturer was required to clear the final product on payment of duty.

Analysis: The job-work arrangement was covered by Notification No. 214/1986-C.E., which permits movement of inputs to the job worker on the footing that the goods manufactured by the job worker are returned and used by the principal manufacturer in the manufacture of dutiable final products. The appellate authority had itself accepted that the Larger Bench view on the analogous Cenvat Credit provisions applied, but denied relief only on the supposed absence of proof that the principal manufacturer paid duty on the final product. That basis could not stand, because the notification scheme itself proceeds on the principal manufacturer's undertaking to clear the final product on payment of duty, and the authority had only expressed a doubt without recording a finding of non-payment.

Conclusion: The denial of credit was unsustainable, and the assessee was entitled to the credit claim.

Ratio Decidendi: Where job work is carried out under Notification No. 214/1986-C.E. for manufacture of goods ultimately cleared as dutiable final products by the principal manufacturer, Cenvat credit on inputs used in such job work cannot be denied merely on a speculative doubt about duty payment by the principal manufacturer.

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