Capital goods credit for job workers cannot be denied absent express prohibition, even when duty is paid by the principal manufacturer.

A manufacturer who also undertakes job work cannot be denied capital goods credit merely because it made no duty-paid clearances as a job worker, where the capital goods were acquired and used in manufacture and no express statutory bar exists. The fact that the job-worked goods ultimately suffered duty in the hands of the principal manufacturer does not, by itself, defeat credit. Exemption available under a notification does not alter the character of manufacture under Section 2(f) of the Central Excise Act, 1944. Capital goods credit was therefore held admissible to the assessee.

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Issues: Whether a manufacturer who also undertakes job work is entitled to capital goods credit in the absence of any express prohibition, and whether exemption available to job-worked goods alters the character of manufacture under Section 2(f) of the Central Excise Act, 1944.

Analysis: The order records that the appellant was a manufacturer and also carried out job work. It notes that the capital goods had been acquired and used in manufacture, while the denial of credit was founded only on the circumstance that no duty-paid clearances were made by the appellant as a job worker. The order further states that the goods job-worked by the appellant ultimately suffered duty in the hands of the principal manufacturer, and that there was no provision in law denying capital goods credit to such a manufacturer. It also holds that exemption under a notification does not change the character of manufacture under Section 2(f) of the Central Excise Act, 1944.

Conclusion: Capital goods credit could not be denied to the appellant, and the issue was answered in favour of the assessee.

Ratio Decidendi: In the absence of an express statutory prohibition, a manufacturer who also works as a job worker cannot be denied capital goods credit merely because the job-worked clearances were exempt or duty was ultimately discharged by the principal manufacturer, since such exemption does not alter the character of manufacture.

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