Job-work credit on duty-paid intermediate goods remains admissible despite prior input credit under the job-work rules.

Where inputs are sent to a job worker under the job-work rules and the processed intermediate goods are returned on payment of duty, credit on that duty is admissible to the principal manufacturer even if credit had already been taken on the original inputs. The conditional exemption under Notification No. 214/86-CE is not compulsory for the job worker in such cases. Duty paid on the cleared intermediate goods, including input cost and job charges, could not be denied as credit merely on the ground of prior input credit, so the demand was unsustainable.

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Issues: Whether credit of duty paid by the job worker on intermediate goods returned after job work could be denied to the principal manufacturer on the ground that the inputs had already suffered credit, and whether the job worker was bound to avail exemption under Notification No. 214/86-CE.

Analysis: The inputs were sent to the job worker under the job-work provision and the processed goods were returned on payment of duty. The governing rule permitted sending inputs to a job worker for further processing and did not make availment of the conditional exemption under Notification No. 214/86-CE compulsory. The intermediate products were received back within the stipulated period, and the duty paid on their clearance was on a value that included the cost of inputs and job charges. In such circumstances, credit could not be denied merely because the principal manufacturer had already taken credit on the original inputs.

Conclusion: The credit of duty paid on the intermediate goods was admissible, and the denial of credit was unsustainable. The appeal by Revenue failed.

Final Conclusion: The order dropping the demand was upheld, and the Revenue challenge was rejected.

Ratio Decidendi: Where inputs are sent to a job worker under the job-work rules and the processed intermediate goods are returned on payment of duty, the principal manufacturer is entitled to credit of such duty, and the job worker is not bound to avail the conditional exemption merely because the principal manufacturer had already taken credit on the inputs.

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