Cenvat credit on job-work clearances upheld, while outward transportation credit turned on the applicable input-service definition.

Cenvat credit on inputs and input services used in job-work clearances under Notification No. 214/86-CE was held allowable, because the exemption did not justify denial under Rule 6 of the Cenvat Credit Rules, 2004; the distinction between inputs and input services was rejected and the Larger Bench view favouring credit was followed. Credit on Goods Transport Agency services for outward transportation was allowed up to 01.04.2008, while the post-amendment period required fresh examination in light of the revised definition of input service, and was remanded for reconsideration.

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Issues: (i) Whether Cenvat credit on inputs and input services used in the manufacture of goods cleared under Notification No. 214/86-CE could be denied under Rule 6 of the Cenvat Credit Rules, 2004. (ii) Whether Cenvat credit on Goods Transport Agency services used for outward transportation was admissible for the period up to 01.04.2008 and, for the later period, required fresh examination after the amendment to the input service definition.

Issue (i): Whether Cenvat credit on inputs and input services used in the manufacture of goods cleared under Notification No. 214/86-CE could be denied under Rule 6 of the Cenvat Credit Rules, 2004.

Analysis: The clearance of goods under Notification No. 214/86-CE was treated as a distinct job-work based exemption linked to manufacture of dutiable final products by the principal. The distinction drawn between inputs and input services was rejected, as the governing principle applied equally to both categories. The Larger Bench view supporting availment of credit in such job-work situations was followed, and the denial of credit on this ground was found unsustainable.

Conclusion: The denial of Cenvat credit on inputs and input services for goods cleared under Notification No. 214/86-CE was set aside, in favour of the assessee.

Issue (ii): Whether Cenvat credit on Goods Transport Agency services used for outward transportation was admissible for the period up to 01.04.2008 and, for the later period, required fresh examination after the amendment to the input service definition.

Analysis: For the period up to 01.04.2008, the applicable law on input service credit for outward transportation was covered in favour of the assessee. For the subsequent period, the Tribunal noted the amendment to the definition of input service and held that the effect of that amendment had to be examined by the lower authority before deciding entitlement for the later period.

Conclusion: Credit on outward transportation was allowed up to 01.04.2008, while the post-01.04.2008 period was remanded for fresh decision, partly in favour of the assessee.

Final Conclusion: The assessee succeeded on the denial of credit relating to job-work clearances and on outward transportation credit for the pre-amendment period, while the later period issue was sent back for reconsideration.

Ratio Decidendi: Credit eligibility under the Cenvat scheme cannot be denied merely because the goods are cleared under a job-work exemption, and outward transportation credit must be determined with reference to the governing definition of input service applicable to the relevant period.

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