Job worker Cenvat credit re-credit sustained where duty-free clearance to principal is not treated as exempted goods.

A job worker was allowed to re-credit Cenvat credit reversed earlier on furnace oil used in job work because the Tribunal applied the Larger Bench ruling, as affirmed in principle by the Supreme Court, that inputs used in manufacturing job-worked goods cleared to the principal manufacturer without duty do not attract the exemption-based credit bar. The Tribunal noted that such clearances are not treated as exempted goods for the relevant Modvat/Cenvat restriction and that the challenge to the Larger Bench view had already failed. On that basis, the credit claim was sustained and the departmental appeal failed.

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Issues: Whether the respondent was entitled to take re-credit of the Cenvat credit reversed earlier in respect of duty paid on furnace oil used in job work.

Analysis: The Tribunal applied the Larger Bench ruling which, following the Supreme Court, had held that a job worker could avail Modvat credit on inputs used in manufacturing job-worked goods cleared to the principal manufacturer without payment of duty, because such goods were not treated as exempted goods for the purpose of Rule 57C. The Tribunal also noted that the challenge to the Larger Bench decision had been dismissed by the High Court and that the departmental appeal did not effectively dislodge that position.

Conclusion: The respondent was entitled to re-credit of the Cenvat credit in its Cenvat account.

Final Conclusion: The appeal failed and the credit claim in favour of the respondent was sustained.

Ratio Decidendi: A job worker is not denied Cenvat or Modvat credit merely because the processed goods are cleared without duty to the principal manufacturer, since such clearances are not treated as exempted goods for the relevant credit restriction.

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