Job-work clearances under Notification No. 214/86-CE are not exempted goods, so CENVAT credit cannot be denied under Rule 6.

Clearances made under the special job-work procedure in Notification No. 214/86-CE are not treated as exempted goods for CENVAT purposes where duty is ultimately discharged by the principal manufacturer. On that basis, input credit on goods used in job-work manufacture cannot be denied merely by invoking Rule 6, and the consequential demand under Rule 14 and Rule 15 of the CENVAT Credit Rules, 2004 also fails. The analysis follows the settled Modvat and CENVAT line that the job-worker's intermediate clearance does not alter the final duty-paid character of the manufacture. The impugned appellate order was stated to be contrary to settled law.

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Issues: Whether CENVAT credit on inputs used in job-work manufacture could be denied and reversed on the ground that the job-work clearances were covered by Notification No. 214/86-CE and were therefore treated as exempted goods attracting Rule 6, with consequential application of Rule 14 and Rule 15 of the CENVAT Credit Rules, 2004.

Analysis: The dispute turned on the settled position that the special job-work procedure under Notification No. 214/86-CE does not make the intermediate clearances the final exempted product of the job worker. The inputs consumed by the job worker are used in a process where duty is ultimately discharged at the principal manufacturer's end, and the legal effect is not the same as a clearance of goods exempted from duty or chargeable to nil rate. The Tribunal applied the earlier consistent line of authority holding that mechanical invocation of Rule 6 cannot defeat credit where the statutory scheme only shifts the point of duty payment and the final product remains duty-paid. The reasoning also accepted that the later CENVAT regime follows the same principle as the earlier Modvat line of cases.

Conclusion: The denial of credit was unsustainable, Rule 6 was not attracted, and the consequential demand invoking Rule 14 and Rule 15 could not survive.

Final Conclusion: The impugned appellate order was contrary to settled law and was set aside, resulting in allowance of the appeal in favour of the appellant.

Ratio Decidendi: Clearances made under the special job-work procedure, where duty is ultimately paid by the principal manufacturer, are not to be treated as exempted final products for the purpose of denying input credit under the CENVAT scheme.

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