Cenvat credit on duty-paid capital goods remained admissible despite initial dispatch under job work challans and later supplementary invoices.

Cenvat credit on capital goods was held admissible where the supplier had paid duty through supplementary invoices after the goods were first sent under job work challans. The analysis applied Rule 4(5)(a), which permits movement of capital goods to a job worker and recognises reversal and re-credit if the goods are not returned within the prescribed period, together with Rules 3(4) and 3(5), under which duty paid on removal as such is treated as creditable. Credit could not be denied merely because the initial movement was under job work documentation, and the demand, interest, and penalties were stated to be unsustainable.

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Issues: Whether Cenvat credit was admissible to the recipient on duty paid by the supplier on capital goods initially sent under job work challans and later covered by supplementary invoices.

Analysis: The duty paid by the supplier on the capital goods was not in dispute. Rule 4(5)(a) permits movement of inputs or capital goods to a job worker and contemplates reversal and re-credit where the goods are not received back within the stipulated period. Rule 3(4) requires payment equal to the credit availed when capital goods are removed as such, and Rule 3(5) treats such amount as eligible for credit as if it were duty paid by the person removing the goods. On that basis, the credit taken by the recipient on the duty paid through the later invoices could not be denied merely because the goods had initially moved under job work challans.

Conclusion: Cenvat credit on the duty paid capital goods was admissible and the demand, interest, and penalties were unsustainable.

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