Cenvat credit on job-work furnace oil allowed where final products are duty paid under settled precedent

Cenvat credit on furnace oil used in job-work manufacture is stated to remain admissible where the inputs are used in producing goods that ultimately suffer duty, because the Rule 57C bar does not apply merely due to intermediate clearance for further processing in the principal manufacturer's factory. The note relies on settled Larger Bench precedent and the scheme's anti-cascading purpose to support credit availability when statutory conditions are otherwise met. On that basis, the related claims for interest and penalty were treated as consequential and not independently sustainable.

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Issues: Whether Cenvat credit on furnace oil used in manufacture on job-work basis for goods ultimately cleared on payment of duty by the principal manufacturer was admissible, and whether interest and penalty could be sustained on the alleged wrong availment of credit.

Analysis: The credit dispute had already been settled by Larger Bench authority holding that where inputs are used in the manufacture of intermediate or final products and the final product suffers duty, the bar under Rule 57C does not apply merely because the goods are cleared without duty at an intermediate stage for further use in the principal manufacturer's factory. The decision emphasized the object of the scheme to avoid cascading of duty and recognised that credit remains available where the statutory conditions are otherwise satisfied. Applying that settled position, the Tribunal treated the assessee's claim to credit on furnace oil as covered by binding precedent. Since the challenge to interest and penalty was consequential to the credit dispute, the Revenue's plea on those aspects also could not survive.

Conclusion: The credit was held admissible and the assessee succeeded. The Revenue's appeal for interest and penalty was rejected.

Final Conclusion: The Tribunal disposed of the matter by following settled precedent on admissibility of credit in job-work manufacture and by declining consequential interest and penalty relief to the Revenue.

Ratio Decidendi: Cenvat or Modvat credit is not denied merely because inputs are used in an intermediate process on job work if the final product is duty paid and the statutory scheme does not attract the bar against credit on such clearances.

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