Cenvat credit on job-work inputs cannot be denied for lack of formal notification coverage when final products are dutiable.

Cenvat credit on duty-paid nylon filament yarn was held admissible where the inputs were sent directly to job workers for conversion into knitted fabric and the intermediate fabric was used in making dutiable laminated fabrics. The Tribunal found that the Revenue's objection based only on the job workers not being formally covered under Notification No. 214/86-C.E. was a procedural lapse that could not defeat the substantive benefit of the credit scheme. Since the inputs were duty-paid, the processing was for manufacture of final dutiable products, and the scheme's substantive conditions were satisfied, denial of credit was set aside.

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Issues: Whether Cenvat credit of duty paid on nylon filament yarn could be denied merely because the job workers were not operating under Notification No. 214/86-C.E., where the inputs were sent directly to the job workers and the intermediate fabric was used in the manufacture of dutiable final products.

Analysis: The inputs were purchased on duty payment and sent directly to job workers for conversion into knitted fabric, which was thereafter used in the manufacture of laminated fabrics cleared on payment of duty. The Revenue's objection was confined to the absence of formal coverage of the job workers under Notification No. 214/86-C.E. The Tribunal held that the relevant scheme permitted credit when inputs were sent to a job worker and returned for use in the manufacture of final products, and that the substantive benefit could not be denied where the intermediate goods were in effect exempt from duty and the final products were dutiable. The procedural objection was therefore insufficient to defeat the credit.

Conclusion: Cenvat credit was held to be admissible to the assessee, and the denial of credit was set aside.

Ratio Decidendi: Cenvat credit on inputs cannot be denied when the inputs are sent to a job worker for processing and the resulting intermediate goods are used in the manufacture of dutiable final products, merely because the job worker is not formally availing a particular exemption notification, if the substantive conditions of the credit scheme are otherwise satisfied.

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