Job-work input service credit allowed where processed goods cleared to the principal manufacturer suffered duty.

A job worker processing goods for a principal manufacturer was treated as eligible for input service credit on Goods Transport Agency service and Business Auxiliary Service because the processed goods were cleared to the principal manufacturer and the final product had suffered duty. The analysis relied on the job-work treatment reflected in Notification No. 214/86-C.E. and Notification No. 8/2005, under which such processing activity was recognised as duty-compliant. On that basis, the input services used in the processing activity were held creditable, and denial of credit was unsustainable.

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Issues: Whether a job worker was entitled to avail input service credit on Goods Transport Agency service and Business Auxiliary Service when the processed goods cleared to the principal manufacturer had suffered duty.

Analysis: The appellant acted as a job worker and the goods processed by it were cleared to the principal manufacturer, who paid duty on the final product. Notification No. 214/86-C.E. dated 25-03-1986 permitted a job worker to receive goods without payment of duty and to avail credit in the course of processing, while Notification No. 8/2005 dated 01-03-2005 reflected the same treatment for the relevant job-work activity. Since the final products processed by the appellant had admittedly suffered duty, the input services used in that activity were held to be eligible for credit.

Conclusion: The appellant was entitled to take the input service credit and the denial of credit was unsustainable.

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