Cenvat Credit on job-worker inputs remains available under Notification 214/1986-CE when final duty is paid by the principal manufacturer.

Notification No. 214/1986-CE creates a job-work procedure in which duty is shifted to the principal manufacturer, so goods cleared by the job worker are not treated as exempted goods. On that basis, Cenvat credit on paints used by the job worker was held admissible because the inputs were used in processing for final dutiable manufacture, and denial of credit would wrongly ignore the anti-cascading principle. The disallowance was therefore unsustainable, and the text states that the appeal succeeded with the credit denial set aside.

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Issues: Whether Cenvat credit of duty paid on paints used by a job worker was admissible when the processed goods were cleared under Notification No. 214/1986-CE and the cost of paints was separately shown in the invoices.

Analysis: Notification No. 214/1986-CE is a special procedure for job work under which duty is not avoided but is shifted to the principal manufacturer; the goods cleared by the job worker are not treated as exempted goods. The Tribunal relied on prior decisions holding that in such a job-work arrangement, credit on inputs used by the job worker is not barred merely because the intermediate goods are cleared without duty at the job-worker stage, so long as the final product is subjected to duty by the principal manufacturer. The principle against cascading of duty and the settled view that intermediate clearance under the notification is not equivalent to clearance of exempted goods supported the assessee's claim.

Conclusion: Cenvat credit on the paints used in the job work was admissible and the disallowance was unsustainable.

Final Conclusion: The appeal succeeded and the demand/disallowance based on denial of credit was set aside.

Ratio Decidendi: Goods cleared by a job worker under Notification No. 214/1986-CE are not exempted goods, and Cenvat credit on inputs used in such job work cannot be denied merely because duty is paid at the principal manufacturer's stage.

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