CENVAT credit on moulds and dies requires verification of factory use before denial is sustained

CENVAT credit on moulds and dies sent to a vendor could not be conclusively denied without examining whether the same goods were also used in the assessee's own factory. The vendor was treated as not being a job-worker because it sourced its own raw materials rather than receiving them from the principal manufacturer. Although there was no specific pre-27.02.2010 provision permitting removal of moulds and dies to such a vendor, the record did not show consideration of the assessee's alternate use claim. If that use was established, denial of credit would not automatically follow and any lapse would be only procedural, requiring de novo adjudication.

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Issues: Whether denial of CENVAT credit on moulds and dies sent to vendors was justified, and whether the matter required reconsideration on the question whether the assessee also used the same moulds and dies in its own factory.

Analysis: The vendor was not a job-worker within the meaning of Rule 2(n) of the CENVAT Credit Rules, 2004, because it procured raw materials itself and did not receive raw materials from the principal manufacturer for processing. Prior to 27.02.2010, there was no specific provision enabling removal of moulds and dies to such a vendor under the CENVAT Credit Rules. However, the record did not show that the adjudicating authority examined the assessee's contention that the same moulds and dies were also used in its own factory for manufacture of excisable goods. If that contention were established, denial of credit would not follow and the lapse would be only procedural.

Conclusion: The denial of credit could not be finally sustained without examining the assessee's user of the moulds and dies in its own factory, and the matter was required to be sent back for de novo adjudication.

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