CENVAT credit cannot be denied for direct dispatch to job worker when duty-paid inputs and substantive conditions are satisfied.

CENVAT/MODVAT credit on duty-paid tin sheets sent directly to a job worker could not be denied merely because the inputs were not first routed through the assessee's factory or because the department was not informed of the direct dispatch. The court applied the principle that substantive credit entitlement is not lost when duty-paid inputs are sent for processing into intermediate goods and later received back, and that procedural lapses such as non-maintenance of records or non-intimation, by themselves, do not defeat the credit. The denial of credit, and the connected penalty, were held unsustainable.

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Issues: Whether CENVAT/MODVAT credit on tin sheets sent directly to a job worker could be denied merely because the inputs were not routed through the assessee's factory and the department was not informed of such direct dispatch.

Analysis: The credit related to inputs on which duty had already been paid, and the materials were sent to a job worker for printing and cutting before being received back by the assessee. The governing principle is that inputs need not necessarily be physically used within the factory premises if they are sent to a job worker for manufacture of intermediate goods and the duty-paid nature of the inputs is established. The prior decision in the assessee's own case had already accepted that mere non-maintenance of records or procedural non-compliance would not destroy the substantive entitlement to credit. The Tribunal's order did not give adequate reasons for departing from that position, and denial of credit on this ground was not justified.

Conclusion: The issue is answered in favour of the assessee; credit could not be denied on the sole ground of direct dispatch to the job worker and non-intimation to the department.

Final Conclusion: The impugned denial of credit and the connected penalty were unsustainable, and the assessee succeeded on the substantive credit issue.

Ratio Decidendi: Where duty-paid inputs are sent directly to a job worker for processing and the substantive conditions for credit are met, procedural lapses such as direct dispatch or non-intimation, by themselves, do not justify denial of credit.

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