Job-work credit rule cannot be stretched to require return of waste and scrap generated at the job worker's premises.

Rule 4(5)(a) of the Cenvat Credit Rules, 2002 was construed as regulating the movement of inputs to a job worker and the attached conditions, but not as extending to waste and scrap generated during job work at the job worker's premises. On that interpretation, the Revenue's reading that such waste and scrap had to be returned to the principal manufacturer was rejected. The rule was held not to impose that requirement in the absence of clear language, and the demand and penalty were treated as unsustainable.

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Issues: Whether Rule 4(5)(a) of the Cenvat Credit Rules, 2002 required the return of waste and scrap generated at the job worker's premises to the principal manufacturer for the credit to remain admissible.

Analysis: The provision was construed as governing the sending of inputs to a job worker and the conditions attached to such movement. The Tribunal had previously interpreted the rule as not extending to the return of waste and scrap generated during manufacture at the job worker's premises. Following that interpretation, the requirement contended for by the Revenue was not found to be part of Rule 4(5)(a).

Conclusion: The rule did not require waste and scrap generated at the job worker's premises to be returned to the principal manufacturer's factory, and the demand and penalty were unsustainable.

Final Conclusion: The appeal was allowed and the impugned order was set aside.

Ratio Decidendi: A job-work provision permitting removal of inputs to a job worker cannot be extended, without clear language, to impose a requirement that waste and scrap generated in the course of such job work must be returned to the principal manufacturer.

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