Job-work clearances under Notification No. 214/86 are not exempted goods, so Rule 6 Cenvat credit restrictions do not apply.

Goods manufactured by a job worker under Notification No. 214/86 are not exempted goods, because the notification only shifts duty liability to the principal manufacturer and postpones payment of duty rather than granting an unconditional exemption. As a result, Rule 6 of the Cenvat Credit Rules, 2004 is not attracted to such clearances, and credit cannot be denied on inputs used by the job worker on the footing that the final goods were exempt. The document states that the denial of credit and the consequential demand could not be sustained.

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Issues: Whether goods manufactured by a job worker under Notification No. 214/86 dated 25.3.1986 could be treated as exempted goods so as to attract Rule 6 of the Cenvat Credit Rules, 2004 and deny credit on inputs used in the job work.

Analysis: Notification No. 214/86 is a special notification for job work under which duty liability is shifted from the job worker to the principal manufacturer and payment of duty is only postponed. It is not an unconditional exemption notification. Goods cleared by the job worker under this arrangement therefore cannot be treated as exempted goods. Once the final products are not exempted goods, Rule 6 of the Cenvat Credit Rules, 2004 has no application and there is no basis for disallowing credit attributable to the materials used by the job worker.

Conclusion: Rule 6 was not applicable and the denial of credit and consequential demand could not be sustained.

Ratio Decidendi: Goods cleared by a job worker under Notification No. 214/86 are not exempted goods, because the notification only shifts and postpones duty liability to the principal manufacturer; therefore Rule 6 of the Cenvat Credit Rules, 2004 is not attracted.

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