Cenvat credit on capital goods sent directly to job worker permitted; clarificatory amendment and revenue neutrality sustain credit.

Cenvat credit on capital goods sent directly to a job worker is allowable where the assessee remained owner and the goods were exclusively used in manufacture; this follows from a clarificatory amendment permitting credit without physical receipt at the factory, and thus credit retention was justified. Procedural non-compliance alone cannot forfeit substantive credit rights, applying the principle that procedural infractions do not deny substantive benefit. Time-bar arguments fail because there was no suppression and the matter is revenue-neutral; however, where capital goods are not returned within 180 days the credit must be reversed and reclaimed upon receipt.

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Issues: Whether the appellant is entitled to retain Cenvat credit on capital goods (Kink Bending Machine) which were sent directly to a job worker and not brought to the appellant's factory premises, and whether extended period of limitation and penalty can be invoked.

Analysis: The dispute concerns claim of Cenvat credit on capital goods used exclusively for manufacture of appellant's final products but remaining at the job worker's premises due to size and weight, and whether Rule 4(5)(a) permits such credit without physical receipt in the factory. Rule 4(5)(a) allows Cenvat credit for inputs or capital goods sent to a job worker provided the goods are received back within the stipulated period and contains a proviso (inserted by Notification No.6/2015-CE dated 01.03.2015) clarifying that credit shall be allowed even if capital goods are directly sent to a job worker and the two-year period is counted from receipt by the job worker. The Tribunal examined precedent holdings that mere location of capital goods outside factory does not deny credit, considered revenue-neutrality where reversal is provided for non-return within time, and noted absence of any allegation that the goods were ineligible capital goods under Rule 2(a). On limitation, the Tribunal found no suppression or intent to evade duty; the Adjudicating Authority had held the infraction was technical and the appellant had paid duty, negating invocation of extended period.

Conclusion: Credit on the capital goods sent to the job worker without being brought to the appellant's factory is allowable under Rule 4(5)(a) as understood with the clarificatory proviso; there is no basis to invoke extended limitation or impose penalty. The appeal is allowed on merits and limitation in favour of the assessee.

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