Cenvat credit on capital goods used for job work remains admissible when goods move to the principal manufacturer without duty payment.

Capital goods used exclusively for job-work manufacture, where the finished or semi-finished goods are removed to the principal manufacturer without payment of duty under the job-work procedure, are not treated as used for exempted final products for denying Cenvat credit. The Tribunal followed settled precedent and rejected the departmental objection, holding that credit on such capital goods was admissible. As a result, the demand and penalty based on denial of credit could not survive, and the appellate orders were set aside in favour of the assessee.

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Issues: Whether Cenvat credit on capital goods used exclusively for job-work manufacture for a principal manufacturer was admissible.

Analysis: The Tribunal applied the settled position that capital goods used in job work, where the finished or semi-finished goods are removed to the principal manufacturer without payment of duty under the job-work procedure, do not fall within the expression exempted final products for the purpose of denying credit under the Cenvat scheme. The issue was treated as covered by earlier binding precedent and the contrary departmental objection was rejected.

Conclusion: Cenvat credit on the capital goods was held admissible, and the demand and penalty based on its denial could not survive.

Final Conclusion: The appellate orders were set aside and the appeals succeeded with relief to the assessee.

Ratio Decidendi: Capital goods used exclusively in job work for goods removed without payment of duty to the principal manufacturer do not attract the bar applicable to exempted final products, and credit on such capital goods is allowable under the Cenvat scheme.

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