Cenvat credit on direct job-work supplies for export goods cannot be denied for non-receipt in factory or minor procedural lapses.

Inputs sent directly to a job worker for manufacture of export goods on behalf of an assessee remain eligible for Cenvat credit under Rule 4(5)(a) of the Cenvat Credit Rules, 2002. The credit cannot be denied merely because the inputs did not first enter the assessee's factory, or because of minor procedural lapses in documentation, where the purchase, job work manufacture, and export are otherwise supported by records. In such a job work export arrangement, the movement of inputs to the job worker is sufficient to sustain credit, and the resulting denial of credit is unsustainable. Consequential demand, interest, and enhanced penalty also cannot be maintained once credit is allowable.

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Issues: Whether Cenvat credit was admissible where inputs were supplied directly to a job worker instead of being received in the assessee's factory, and the final products manufactured on job work basis were exported.

Analysis: The input materials were purchased by the assessee and used by the job worker in manufacturing the final product on behalf of the assessee. The final goods were exported by the assessee. In such a job work arrangement, the inputs need not first enter the assessee's factory, and the movement of inputs for job work was governed by Rule 4(5)(a) of the Cenvat Credit Rules, 2002. The absence of a factory receipt of inputs, or any minor procedural lapse in the documentation, did not justify denial of credit where the transaction was otherwise supported by records and the manufacture and export were on behalf of the assessee.

Conclusion: Cenvat credit was admissible and the denial of credit was unsustainable; the issue was decided in favour of the assessee.

Final Conclusion: The demand, interest, and enhanced penalty could not be sustained once the credit was held allowable in a job work export arrangement.

Ratio Decidendi: Inputs sent directly to a job worker for manufacture of export goods on behalf of the assessee are eligible for Cenvat credit, and such credit cannot be denied merely because the inputs were not first received in the assessee's factory or because of minor procedural irregularities.

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