Rule 6 Cenvat credit reversal does not apply to job-work for dutiable final products when credit is otherwise available.

Job-work services rendered for principal manufacturers whose final products were cleared on payment of central excise duty were treated as taxable activity for which Cenvat credit on inputs and input services was legitimately available under Rule 3 of the Cenvat Credit Rules, 2004. Because the credit related to the taxable job-work activity and the output was not exempted, Rule 6, which governs exempted output services, had no application. The stated effect was that reversal of Cenvat credit was not required and the demand, interest, and penalties were unsustainable. The discussion also notes that the exemption under Notification No. 8/2005-ST applied only where the job-work activity related to goods used in or in relation to manufacture of dutiable final products.

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Issues: Whether the appellants were required to reverse Cenvat credit or pay amount under Rule 6 of the Cenvat Credit Rules, 2004 in respect of job-work services rendered for principal manufacturers who were paying central excise duty on the final products.

Analysis: The goods processed by the appellants were returned to principal manufacturers who discharged central excise duty on the final products. The exemption under Notification No. 8/2005-ST was available only where the job-work activity related to goods used in or in relation to manufacture of dutiable final products. In that situation, the appellants were entitled to avail Cenvat credit on inputs and input services under Rule 3 of the Cenvat Credit Rules, 2004. Since the credit was legally available for the taxable activity undertaken, Rule 6 of the Cenvat Credit Rules, 2004, which applies to exempted output services, had no application.

Conclusion: The appellants were not required to reverse Cenvat credit under Rule 6, and the demand, interest, and penalties were unsustainable.

Ratio Decidendi: Where job-work is performed on goods for a principal manufacturer who pays duty on the final products, the service is not one to which Rule 6 of the Cenvat Credit Rules, 2004 can be applied to deny or reverse Cenvat credit legitimately available under Rule 3.

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