Cenvat credit re-credit for job-work fuel upheld where inputs supported manufacture of dutiable goods supplied to principal manufacturer.

Cenvat credit on furnace oil used by a job worker in manufacture of goods supplied to a principal manufacturer under Notification No. 214/86-C.E. was held re-creditable after earlier reversal. The Tribunal applied the Larger Bench view that inputs used in relation to job-worked goods are not hit by the exclusion corresponding to Rule 57C, because such goods are not treated as exempted for that purpose and are ultimately dutiable in the hands of the principal manufacturer. The prior reversal did not extinguish the substantive credit entitlement, and the Revenue's objection based on unjust enrichment was not meaningfully pressed. Re-credit was therefore allowed.

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Issues: Whether the respondent was entitled to re-credit of the Cenvat credit reversed earlier in respect of duty paid on furnace oil used as fuel in job work, and whether the Revenue could deny such re-credit on the footing that the job-worked goods were exempted or that unjust enrichment applied.

Analysis: The dispute concerned furnace oil used by the job worker in converting billets into wire rods and bars supplied to the principal manufacturer without payment of duty under Notification No. 214/86-C.E. The Tribunal followed the Larger Bench ruling that credit on inputs used by a job worker in relation to manufacture of job-worked goods is not barred by the provision corresponding to Rule 57C, because such goods are not treated as exempted for that purpose and are ultimately dutiable in the hands of the principal manufacturer. The earlier reversal of credit therefore did not destroy the substantive entitlement to take credit back. The objection based on unjust enrichment was also not pressed by the Revenue in a meaningful manner.

Conclusion: The respondent was entitled to re-credit of the Cenvat credit in its account and the Revenue's challenge failed.

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