Cenvat credit for job-work processing upheld where intermediate clearance was not treated as exempted final goods.

Cenvat credit on inputs used by a job worker in processing goods cleared at an intermediate stage without duty was held admissible, because such clearance was not equivalent to removal of exempted final goods. The credit covered inputs used both in the assessee's own manufacture and in job-work processing, and the governing Cenvat Credit Rules, including the job-work scheme under Rule 12B, supported availability of credit. As the final products were admittedly dutiable and the object of Cenvat credit is to avoid duty cascading, credit could not be denied merely because some inputs were used in the intermediate job-work process.

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Issues: Whether Cenvat credit on inputs such as lubricants, soaps and chemicals used by a job worker in processing goods cleared without payment of duty at an intermediate stage could be denied on the footing that such credit was relatable to exempted goods.

Analysis: The credit was claimed in respect of inputs used both in the assessee's own manufacture and in job-work processing. The adjudicating authority, appellate authority and Tribunal accepted that clearing goods at an intermediate stage under the job-work arrangement was not the same as clearing final exempted goods. The Board's circular and the amended Cenvat Credit Rules, including the job-work scheme under Rule 12B, supported availability of credit to a job worker for inputs used in such processing. The object of Cenvat credit is to prevent cascading of duty, and the final products were admittedly dutiable.

Conclusion: Cenvat credit was admissible and could not be denied merely because some inputs were used in goods cleared without duty under the job-work arrangement; the appeal failed.

Ratio Decidendi: Goods cleared at an intermediate stage under a job-work arrangement are not equivalent to exempted final goods, and Cenvat credit on inputs used in such processing cannot be denied where the final products are dutiable and the governing rules permit the credit.

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