Cenvat credit for job workers under Notification 214/86-CE cannot be denied merely because duty is not discharged by the job worker.

Cenvat credit could not be denied to a job worker manufacturing goods under Notification No. 214/86-CE merely because Rule 6(1) of the Cenvat Credit Rules, 2004 was invoked on the footing that the goods were exempted. The controlling principle was that Rule 6(1) cannot be applied in isolation where the goods are not exempted in substance, and the fact that the job worker was not required to discharge duty did not make the goods exempted goods. On that basis, the denial of credit was unsustainable and the appellant remained entitled to the Cenvat credit claimed.

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Issues: Whether Cenvat credit could be denied to a job worker manufacturing goods under Notification No. 214/86-CE on the ground that Rule 6(1) of the Cenvat Credit Rules, 2004 barred credit on the basis that the goods were exempted.

Analysis: The denial of credit was examined in the light of the notification governing job work and the settled position that Rule 6(1) cannot be applied in isolation where the goods are not exempted in substance. The controlling consideration was that the goods manufactured by the appellant were not exempted goods merely because the appellant, as a job worker, was not required to discharge duty. On that basis, the Court held that the appellant remained entitled to Cenvat credit and that the adverse view taken in the impugned order was unsustainable.

Conclusion: The denial of Cenvat credit was not justified and the appellant was entitled to the credit claimed.

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