Cenvat credit on inputs for captively consumed job-work machines upheld despite duty-free clearance of final goods

Cenvat/Modvat credit was held admissible on inputs used in machines captively consumed for job work, even though the final goods were cleared without duty under Notification No. 67/95-C.E. The Tribunal applied the statutory credit scheme and binding Supreme Court authorities, and the High Court found no error in that approach. On the facts found, credit could not be denied merely because the inputs were used in machines employed for job work within the factory. The issue was therefore answered against the Revenue and in favour of the assessee.

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Issues: Whether Cenvat/Modvat credit was admissible on inputs used in captively consumed machines which were employed for job work and where the final goods were cleared without payment of duty under Notification No. 67/95-C.E.

Analysis: The dispute turned on the interpretation of the credit rules governing inputs and capital goods, together with the effect of the exemption notification and the nature of the use of the machines in the factory. The Tribunal relied on the applicable statutory credit scheme and the governing Supreme Court authorities to hold that the assessee was entitled to the credit claimed. The High Court found no error in that approach and agreed with the Tribunal's conclusion that the credit could not be denied on the facts of the case.

Conclusion: The issue was answered against the Revenue and in favour of the assessee.

Ratio Decidendi: Credit under the excise Modvat/Cenvat scheme cannot be denied merely because the inputs are used in machines captively consumed for job work, where the governing legal framework and binding precedent support admissibility of credit on the facts found.

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