CENVAT credit remains admissible for input services used at functionally integrated job-work units under centralized accounting.

CENVAT credit on input services used at job-work units of the same assessee was treated as admissible where the units functioned as extended units under a centralized accounting system. The units were operationally integrated, movements of materials were supported by delivery challans and material gate passes, credit was taken by the main unit in ER-1 returns, and common financial statements and consolidated income-tax returns were maintained. Since the arrangement was disclosed to the department and the services were eligible input services, credit could not be denied merely because use occurred at the job-work units.

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Issues: Whether CENVAT credit on input services used in the job-work units of the same assessee was admissible where the units functioned as extended units under a centralized accounting system.

Analysis: The assessee maintained centralized accounts for all units, and the job-work units operated as extended units of the main manufacturing unit. Materials moved between units under delivery challans and material gate passes, the credit was taken by the main unit in its ER-1 returns, and there was a common profit and loss account, balance sheet, and consolidated income-tax returns. The units and their operational arrangement had also been disclosed to the department. In view of the factual integration of the units and the precedents relied upon, the disallowance of credit was not justified.

Conclusion: CENVAT credit on the disputed input services was held admissible, and the Revenue's challenge failed.

Ratio Decidendi: Where separate units are functionally integrated as extended units of the same assessee and the credit is accounted for centrally in the main unit, CENVAT credit on eligible input services cannot be denied merely because the services were used at the job-work units.

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