Cenvat credit for job workers under Notification 214/86 upheld where goods were treated as dutiable at the intermediate stage.

A job worker clearing goods under Notification No. 214/86 was considered entitled to Cenvat credit on inputs, because the goods were not exempt in the hands of the ultimate manufacturer and were treated as dutiable at the intermediate stage. The analysis relied on the earlier stay order and the position recognised in Flex Chemicals and Modi Sales. On that basis, denial of credit merely because the goods were treated as exempt at one stage was not justified, and the credit denial was set aside.

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Issues: Whether a job worker clearing goods under Notification No. 214/86 dated 25th March, 1986 could be denied Cenvat credit on inputs merely because the goods were treated as exempted at that stage.

Analysis: The entitlement to credit was examined in the light of the earlier stay order, which had already noted that the appellant stood covered by the benefit recognized in Flex Chemicals and Modi Sales. The relevant consideration was that the goods were not exempt goods in the hands of the ultimate manufacturer and were, in substance, dutiable at the intermediate stage. On that factual and legal basis, denial of Cenvat credit was not justified.

Conclusion: The appellant was held entitled to Cenvat credit and the denial of credit was set aside.

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