Cenvat credit on job-work intermediates cannot be denied for procedural lapses when no double benefit is actually taken.

Cenvat credit was considered admissible where imported inputs were sent to a job worker under challans, the job worker paid duty on the returned intermediate goods, and the principal manufacturer claimed credit of that duty. The Tribunal treated the Modvat and Cenvat job-work framework as materially equivalent and held that substantive credit could not be denied merely because of procedural non-compliance in the job-work route. It also treated the arrangement as revenue neutral and noted that no actual double benefit was taken, because the job worker had not availed credit on the inputs. On that basis, disallowance of credit and the penalty could not stand.

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Issues: Whether the principal manufacturer was entitled to Cenvat credit on the imported inputs sent to a job worker and also to credit of the duty paid by the job worker on the returned intermediate goods, and whether such credit could be denied as a case of double availment or procedural non-compliance.

Analysis: The imported inputs had suffered countervailing duty and were sent under challans to the job worker. The job worker paid duty on the intermediate goods while returning them, and the assessee took credit of that duty. The Tribunal followed binding precedent holding that the scheme of Modvat and its successor Cenvat credit permits the manufacturer of the final product to avail credit on inputs and on duty paid at the intermediate stage where the job worker has chosen to pay duty. The earlier and present job-work provisions were treated as materially equivalent, and it was held that a procedural lapse in the job-work route does not justify denial of otherwise admissible substantive credit. The transaction was also regarded as revenue neutral, and the fact that the job worker had not availed credit on the inputs further supported admissibility.

Conclusion: The assessee was entitled to the Cenvat credit and the demand of disallowed credit with penalty could not stand.

Final Conclusion: The appeal succeeded and the impugned order disallowing credit and imposing penalty was set aside.

Ratio Decidendi: Where duty-paid inputs are sent to a job worker and the job worker pays duty on the returned intermediate goods, the principal manufacturer cannot be denied Cenvat credit merely because credit was earlier taken on the inputs or because of procedural non-compliance, so long as the statutory scheme otherwise permits the credit and no double benefit is actually availed.

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