CENVAT credit on job-worked export garments upheld where fabrics stayed with the job worker and no fraud was shown.

Rule 12B permits CENVAT credit where textile goods are manufactured through a job worker, and credit on duty-paid fabrics procured in the principal's name and retained at the job worker's premises for export garments was admissible. The credit could not be denied merely because the principal did not physically receive the inputs or itself carry out manufacturing, since the job-work arrangement complied with the operative scheme and the export clearances were made in the principal's name. A procedural objection based on document and movement requirements failed absent fraud or administrative prejudice. The alleged month-wise purchase-consumption discrepancy also did not establish excess credit or improper receipt of inputs, so denial and recovery were unsustainable and the refund claim for unutilised credit survived.

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Issues: (i) Whether CENVAT credit on fabrics procured in the name of the assessee and retained at the job worker's premises for conversion into garments exported in the assessee's name was admissible under Rule 12B of the Central Excise Rules, 2002; (ii) Whether the credit could be denied for non-fulfilment of the document and movement requirements when there was no physical movement of inputs from the assessee's premises to the job worker's premises; (iii) Whether the discrepancy alleged by comparing monthly purchase and consumption figures justified denial of credit and recovery of the amount.

Issue (i): Whether CENVAT credit on fabrics procured in the name of the assessee and retained at the job worker's premises for conversion into garments exported in the assessee's name was admissible under Rule 12B of the Central Excise Rules, 2002.

Analysis: Rule 12B permits a person who gets textile goods manufactured on job work basis to obtain registration, maintain accounts and, where applicable, cause inputs to be supplied to the job worker without reversal of credit. The arrangement in question was one where the job worker procured fabrics in the assessee's name, retained them at its premises, converted them into garments and cleared the garments for export in the assessee's name. On that scheme, the assessee was the person engaging the job worker and the credit on the duty paid fabrics could not be denied merely because the assessee did not itself undertake the manufacturing activity.

Conclusion: The credit was admissible and the denial was unsustainable.

Issue (ii): Whether the credit could be denied for non-fulfilment of the document and movement requirements when there was no physical movement of inputs from the assessee's premises to the job worker's premises.

Analysis: The Tribunal held that the requirements in Rule 12B concerning prescribed documents and dispatch particulars apply where goods are physically moved to the job worker. In the present arrangement, the inputs were procured and retained by the job worker itself for conversion, and there was no movement of fabrics from the assessee's premises. The export clearance was made after issuance of invoice by the assessee and intimation of date and time of removal by the job worker, satisfying the operative scheme of job work under the rule. Mere procedural objection, without any allegation of fraud or administrative inconvenience, did not justify denial of credit.

Conclusion: The procedural objection failed and did not justify denial of credit.

Issue (iii): Whether the discrepancy alleged by comparing monthly purchase and consumption figures justified denial of credit and recovery of the amount.

Analysis: The allegation was based on month-wise comparison of purchases and consumption, but the assessee demonstrated that the total quantities over the relevant period were broadly consistent and the marginal difference was capable of explanation. The Revenue did not successfully rebut this explanation. On the overall material, the allegation of excess credit or improper receipt of inputs was not established.

Conclusion: The discrepancy did not warrant denial of credit or recovery.

Final Conclusion: The assessee was entitled to retain the CENVAT credit on the fabrics used in job-worked export goods, and the consequential refund claim for unutilised credit also survived.

Ratio Decidendi: Where textile goods are manufactured through a job worker under the Rule 12B scheme and the inputs are procured and retained at the job worker's premises for export production in the name of the principal, CENVAT credit cannot be denied merely because the principal did not physically receive the inputs or itself manufacture the final product, absent a proved breach causing fraud or administrative prejudice.

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