Cenvat credit for job-work inputs upheld where exempt clearances alone could not justify denial or Rule 6(3) demand.

Cenvat credit on inputs used in job work was admissible where the job-work activity fell within the relevant exemption notification and the final product chain remained dutiable in the prescribed manner. The Tribunal held that credit could not be denied merely because the goods processed under job work were cleared without payment of duty, and a demand under Rule 6(3) could not be sustained on that basis. The discussion also reinforced judicial discipline, noting that the appellate authority was bound to follow earlier precedent supporting admissibility of credit in such circumstances.

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Issues: Whether Cenvat credit on inputs used in job work could be denied when the goods processed under job work were cleared without payment of duty, and whether the demand based on Rule 6(3) was sustainable.

Analysis: The credit was held to be admissible because the inputs were used in the course of job work covered by the relevant exemption notification, and the Tribunal's earlier decision had already held that credit cannot be denied merely because the job-worker clearance was without duty when the final product is otherwise cleared on duty payment by the principal manufacturer. The appellate authority had also accepted the assessee's contention but failed to follow binding precedent, contrary to the principle of judicial discipline.

Conclusion: The denial of Cenvat credit was not sustainable and the demand based on Rule 6(3) failed; the appeal was allowed.

Ratio Decidendi: Cenvat credit on inputs used for job work cannot be denied merely because the job-work clearances are exempt or without duty where the governing notification and binding precedent permit such credit and the resulting product chain remains dutiable in the prescribed manner.

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