Capital goods credit for job workers allowed where intermediary products were made for an EOU and clearances were not treated as exempted goods.

Capital goods credit was allowable to a job worker manufacturing intermediary products for an EOU, because the undisputed facts showed that the goods were used in the manufacturing process and were not rendered exempt merely by the job-work arrangement. The Tribunal held that clearance by the principal manufacturer, including domestic clearance on payment of duty with the balance exported, did not by itself convert the activity into manufacture of exempted goods so as to bar credit. Revenue's reliance on Notification No. 30/2004 was not accepted on these facts, and the denial of capital goods credit was found unjustified.

---

---

Issues: Whether the appellant was entitled to capital goods credit when the goods were manufactured as a job worker for an EOU and part of the goods were cleared on payment of duty.

Analysis: The material facts were undisputed. The capital goods were used by the appellant for manufacturing intermediary products for an EOU, and the principal manufacturer further processed the goods and cleared part of them in the domestic market on payment of duty while the balance was exported. The Tribunal relied on the principle that clearance by a job worker does not, by itself, render the activity one of manufacture of exempted goods so as to deny credit. The reliance placed by Revenue on Notification No. 30/2004 was not accepted as a bar to credit on the facts found.

Conclusion: The appellant was entitled to capital goods credit and the denial thereof was unjustified.

Ratio Decidendi: Credit cannot be denied to a job worker where the goods are used in the manufacture of intermediary products for an EOU and the goods are not treated as exempted merely because of the job-work arrangement.

---