Cenvat credit on job-work inputs remains available when duty-paid goods return for use in final manufacture

Cenvat credit is described as available where duty-paid inputs are sent only for intermediate processing by a job worker and are received back for use in manufacturing the final product. The text notes that credit under the Cenvat Rules extends to inputs used in or in relation to manufacture, including intermediate products processed on job work, and that denial based on the assessee not functioning as an independent texturiser was rejected. The decisive factors were duty-paid inputs, intermediate processing only, and final use in duty-paid goods; a narrow or technical construction was not applied when the substantive conditions were met.

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Issues: Whether Cenvat credit could be denied where duty-paid inputs were sent for intermediate processing to a job worker and were received back for use in the manufacture of the final product.

Analysis: The credit scheme under the Cenvat Rules permits a manufacturer of final products to avail credit on duty paid inputs used in or in relation to manufacture, including inputs used in intermediate products processed by a job worker and received back for further manufacture. The revenue's reliance on the restriction concerning an independent texturiser was rejected because the assessee was not functioning as an independent texturiser and was not clearing the processed yarn as such. The decisive factors were that the inputs were duty paid, were sent only for intermediate processing, and were ultimately used in the manufacture of duty paid final products. The scheme being beneficial in nature, the entitlement to input duty credit could not be denied on a narrow or technical construction when the substantive conditions were satisfied.

Conclusion: The assessee was entitled to avail the Cenvat credit on the inputs sent for intermediate job work and received back for manufacture of the final product; the question of law was answered in favour of the assessee and against the revenue.

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