CENVAT credit on job-work inputs remains admissible when final products are cleared on payment of duty.

CENVAT credit on duty-paid inputs used in a job-work chain remains admissible where the intermediate goods are returned to the principal manufacturer and the final products are cleared on payment of duty. Applying the Larger Bench ruling in Sterlite Industries, affirmed by the Bombay High Court, the tribunal held that such credit is not barred merely because the immediate clearance is without duty under Rule 57C. The Revenue's contrary objection failed, and the order allowing credit was upheld.

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Issues: Whether CENVAT credit on inputs used in manufacture of goods on job-work basis is admissible when the goods are returned to the principal manufacturer and the final products are ultimately cleared on payment of duty.

Analysis: The dispute was governed by the Larger Bench ruling in Sterlite Industries, which held that credit on duty paid inputs used in the manufacture of intermediate goods cleared without payment of duty for further use by the principal manufacturer is not hit by Rule 57C. That ruling had already been affirmed by the Bombay High Court, and the same legal position applied to the job-work arrangement in the present case. The Revenue's contrary contention therefore could not prevail.

Conclusion: The credit was held to be admissible and the Revenue's appeal failed.

Final Conclusion: The order allowing CENVAT credit was upheld, and the challenge by the Revenue was rejected.

Ratio Decidendi: CENVAT or MODVAT credit on inputs used in a job-work chain is not denied merely because the immediate clearance is without duty, where the goods are used in the manufacture of final products cleared on payment of duty by the principal manufacturer.

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