Cenvat credit on Jobwork

[pardeep bisht]

Can a asseesee avail the cenvat credit on the some raw material used by themself for job work of Export Oriented unit . As per rule 6(6) of cenvat Credit rule no need to reverse the credit of clearance to EOU. Please give your opinion with relevant rule , notification and case law at the earliest

[Dilip Darji]

I understand that EOU is sending some material for job work to DTA. During the process of job work at DTA, Job worker is using some material and the question is that whether Job worker is required to reverse CENVAT Credit on the material used by him, during Job work activity. Rule 6 (6) of CENVAT Credit Rule speaks that the clearances to EOU, not to be treated as exempted goods. Meaning thereby that if the goods are supplied by DTA supplier to EOU, it will not be treated as exempyted goods and DTA supplier would be entitled to avail CENVAT Credit, eventhough duty has not been paid towards the goods supplied to EOU. The provisions of Rule 6(6) talks about clearance and the despatches made by DTA job-worker to EOU, is nothing but a removal/return of goods received for the purpose of job-work.Therefore, it is not a clearance and therefore not covered under Rule 6(6) of CENVAT Credit Rules and Job worker is required to revese CENVAT Credit on the material used by him in job work process. Regards. DILIP DARJI.

AI Summary

Cenvat credit reversal required where job-worker consumes inputs in job work for an EOU because returns are not clearances. Because dispatches by a DTA job-worker back to an EOU are returns/removals of goods received for job work and not clearances covered by Rule 6(6), the job-worker who consumes inputs in the job-work process must reverse the Cenvat credit attributable to those inputs.