CENVAT credit on job-work clearances survives where inputs are processed and returned, with no real revenue loss shown.

CENVAT credit was not required to be reversed where inputs were sent to job workers under Rule 4(5) of the CENVAT Credit Rules, 2004 and the processed goods were returned within the permitted framework. The Tribunal noted that reversal is attracted only if the goods are not received back within the stipulated time, and the record did not show diversion or non-return. It also held that job workers were not compelled to claim exemption under Notification No. 214/86 and could pay duty on the finished goods. As duty was actually paid and taken as credit, and no real revenue loss or dual benefit was shown, the demand for reversal was unsustainable.

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Issues: Whether CENVAT credit was liable to be reversed when inputs were removed to job workers and the processed goods were returned, and whether the department could deny credit on the ground that the job workers themselves paid duty on the finished goods.

Analysis: Rule 4(5) of the Cenvat Credit Rules, 2004 permits removal of inputs to a job worker without prior permission, subject to reversal only if the goods are not received back within the stipulated time. On the facts, the inputs were not shown to have been diverted or not returned; they were received back after processing. The Tribunal held that the job workers were not bound to avail the exemption under Notification No. 214/86 and could choose to pay duty on the finished goods. Since the duty actually paid by the job workers was taken as credit and the transactions did not result in any real revenue loss, the allegation of dual benefit was rejected.

Conclusion: The demand for reversal of CENVAT credit was unsustainable and the appeal was allowed in favour of the assessee.

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