Job-work clearances under Notification 214/86 are not exempted goods, so Rule 6 credit reversal does not apply.

Clearances of processed goods under Notification No. 214/86 in a job-work arrangement were not treated as clearances of exempted goods for Rule 6 of the Cenvat Credit Rules. Inputs were sent by the principal manufacturer to the job worker under Rule 4(5)(a), and the processed goods were returned to the principal; the notification only shifted excise duty liability to the supplier of inputs and did not exempt the goods themselves. On that basis, the demand, interest, and penalty were held unsustainable.

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Issues: Whether clearances of processed goods under Notification No. 214/86 in a job-work arrangement could be treated as clearances of exempted goods so as to attract Rule 6 of the Cenvat Credit Rules.

Analysis: Inputs were sent by the principal manufacturer to the job worker under Rule 4(5)(a) of the Cenvat Credit Rules, and the processed goods were returned to the principal manufacturer. Notification No. 214/86 merely permitted clearance without payment of duty by shifting the liability for excise duty to the supplier of the inputs in respect of the final products. The arrangement did not confer an exemption on the goods themselves. Therefore, such clearances could not be regarded as clearances of exempted goods for the purpose of Rule 6.

Conclusion: The demand, interest, and penalty were not sustainable, and the assessee succeeded.

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