Rule 6 Cenvat reversal not triggered for job-work intermediates used in dutiable final products.

Rule 6 of the Cenvat Credit Rules, 2004 was held inapplicable to job-work clearances where the processed intermediate goods were returned for use in dutiable final products and excise duty was discharged by the principal manufacturer. The Tribunal applied the Cenvat principle against cascading and followed prior decisions to treat the job-worker's activity as part of an integrated manufacturing process rather than an exempted clearance. On that basis, the proposed reversal of 5% or 6% on job charges was not justified, and the demand was set aside.

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Issues: Whether demand of 5% or 6% on job charges under Rule 6 of the Cenvat Credit Rules, 2004 was justified in respect of job-work activity where the principal manufacturers discharged excise duty on the final products.

Analysis: The disputed activity involved multiple manufacturing processes carried out on steel wires received from principal manufacturers under job-work challans, and the processed goods were ultimately returned for use in dutiable final products cleared on payment of excise duty by the principal manufacturers. The Tribunal followed earlier decisions holding that the purpose of the Cenvat framework is to avoid cascading and that intermediate goods arising in job work do not attract Rule 6 restrictions when duty is paid on the final product. On that reasoning, the job-worker's activity could not be treated as giving rise to exempted clearances for the purpose of insisting on 5% or 6% reversal on job charges.

Conclusion: The demand under Rule 6 of the Cenvat Credit Rules, 2004 was not sustainable and was set aside in favour of the assessee.

Final Conclusion: The appeal succeeded and the impugned demand order was annulled, with consequential relief as per law.

Ratio Decidendi: Where job-worked intermediate goods are used in the manufacture of dutiable final products on which excise duty is discharged by the principal manufacturer, Rule 6 reversal is not attracted merely because the job-worker's clearance is part of an integrated manufacturing process.

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