Cenvat credit on job-work clearances and waste scrap duty was upheld where the goods were not treated as exempted goods.

Cenvat credit on furnace oil used in manufacture of rough steel forgings was held not liable to reversal because goods cleared by a job worker under Notification No. 214/86-C.E. are not treated as exempted goods. The Tribunal also held that waste and scrap generated during manufacture are final products within the credit scheme, so credit could be used to pay duty on their clearance. On that basis, the reversal demand and connected penalty were unsustainable, and relief was granted.

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Issues: Whether Cenvat credit on furnace oil was required to be reversed on the ground that the rough steel forgings were cleared without payment of duty under Notification No. 214/86-C.E., and whether credit could be used for payment of duty on waste and scrap generated during manufacture.

Analysis: The Tribunal applied the Larger Bench ruling that goods manufactured by a job worker and cleared without payment of duty under Notification No. 214/86-C.E. are not to be treated as exempted goods. On that basis, furnace oil used in the manufacture of rough steel forgings did not attract reversal of Cenvat credit. The Tribunal also relied on the departmental circular dated 29-8-2000 and held that waste and scrap are final products within the relevant credit scheme, so credit could be utilised for payment of duty on such clearances.

Conclusion: The demand for reversal of Cenvat credit and the connected penalty were unsustainable, and the assessee was entitled to relief.

Final Conclusion: The appeal succeeded, and the impugned order was set aside.

Ratio Decidendi: Goods cleared without duty under a job-work notification are not automatically exempted goods, and credit cannot be denied where the input is used in manufacture and the resulting waste or scrap is a final product on which duty is payable.

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