Job work manufacture and Cenvat credit denial failed where raw materials were supplied and duty was paid on clearances.

Cenvat credit could not be denied merely because manufacture was undertaken through a job worker rather than in the appellant's own premises. The record showed that the appellant supplied raw materials, received the finished goods and cleared them on payment of duty, so the settled principle treated the raw-material supplier as the manufacturer. On that basis, the credit disallowance was unsustainable. Once the principal demand failed, the penalties imposed on the co-appellants also could not survive and were liable to be set aside.

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Issues: Whether Cenvat credit could be denied on the ground that no manufacturing activity took place in the appellant's own premises and the goods were manufactured through a job worker, and whether the penalties imposed on the co-appellants could survive.

Analysis: The credit was denied only because the department treated the appellant as not being the manufacturer since the manufacturing activity was carried out through a job worker. The record showed that the appellant supplied raw materials, received the finished goods, and cleared them on payment of duty. The Tribunal applied the settled position that, in such circumstances, the supplier of raw material is to be treated as the manufacturer. The challenge to credit therefore failed, and once the main demand was set aside, the penalty imposed on the other appellants could not stand.

Conclusion: The denial of Cenvat credit was unsustainable, and the penalties on the co-appellants were also liable to be set aside.

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