Whether job workers are required to reverse input credit for goods cleared under notification no. 214/86?

CASE STUDY

Prepared By: CA Neetu Sukhwani &
Meet Jain

Introduction:
The assessee, M/s Angel Pipes & Tubes Pvt. Ltd., is engaged in the manufacture of S.S. Pipes & Tubes falling under chapter 73 of the Central Excise Tariff Act, 1985. They manufacture the said goods on job-work basis under notification no. 214/86-CE dated 25.3.1986 and also clear the said goods on payment of central excise duty. The major inputs were supplied by the principal manufacturers but certain other related inputs were used by the assessee (job-worker) from their input stocks on which Cenvat Credit was availed. The goods manufactured by the assessee on job work basis from the raw materials supplied by the other person/s were exempted from the whole duty but the goods manufactured by the assessee themselves were being cleared on payment of duty. Accordingly, a show cause notice was being issued to the assessee on the allegation that relevant inputs from the common input stocks of the assessee was being used in manufacture of both dutiable goods as well as exempted and accordingly it appeared that Cenvat Credit was not admissible on such quantity of common inputs & input services used in manufacture of exempted goods. Under the circumstances, it was alleged that the assessee was required to maintain separate records. However, as the assessee did not maintain separate accounts, they were asked to pay 10%/5% of the value of exempted goods in terms of Rule 6(3) of the Cenvat Credit Rules, 2004 amounting to Rs. 25,25,892/-. The outcome of the show cause notice is the subject matter of consideration in the present case study.

M/s ANGEL PIPES AND TUBES (P) LTD.
[SHOW CAUSE NOTICE NO. V(73) ADJ-II/JPR-II/449/09/3473 dated 16.10.2009]

Relevant Legal Provisions:
1.    Notification No. 214/86-CE dated 25.03.86.
2.    Rule 4(5)(a) of Cenvat Credit Rules, 2002/2004.
3.    Rule 6(1), Rule 6 (2), Rule 6(3) of Cenvat Credit Rules, 2002/2004.
4.    Rule 12/14 of Cenvat Credit Rules 2002/2004.
5.    Proviso to Section 11A (1) of Central Excise Act, 1944.
6.    Rule 25 of Central Excise Rules, 2002.

Issue Involved:

The issue involved in the present case is that:

Whether job workers are required to reverse input credit for goods cleared under notification no. 214/86?

Brief Facts:-
This Order-in-Original is being passed in pursuance of the Show Cause Notice issued to M/s Angel Pipes & Tubes (P) Ltd. for not paying an amount equal to 5% or 10%( as applicable at the relevant time) of the value of exempted goods manufactured & cleared by them during the period from March, 2007 to July, 2009 by availing benefit of Notification No. 214/86- CE dated 25.03.86 in terms of Rule 6(3)(b) and Rule 6(3)(i) of the Cenvat Credit Rules, 2002/2004.
The issue involved in the above case is that the assessee was manufacturing excisable goods of other persons under Rule 4(5)(a) of Cenvat Credit Rules, 2002/2004read with Notification No. 214/86-CEdated 25.03.86. The major inputs were supplied by the principal manufacturers but sometimes the same were also made available by assessee after raising appropriate invoices. Other inputs like Furnace Oil, Lubricating oil, Industrial Gases, C.I. Sheets, etc. were used by the assessee from their input stocks on which Cenvat Credit was availed. The goods manufactured by the assessee on job work basis from the raw materials supplied by the other person/s were exempted from the whole duty with Notification No. 214/86-CEdated 25.03.86 but the goods manufactured by the assessee themselves were being cleared on payment of duty and relevant inputs from the common input stocks of the parties were being used in manufacture of both dutiable goods as well as exempted under Notification No. 214/86-CE dated 25.03.86 and accordingly it appeared that a per Rule 6(1) of Cenvat Credit Rules, 2002/2004, Cenvat Credit was not admissible on such quantity of common inputs & input services used in manufacture of exempted goods. Under the circumstances the assessee was required to maintain separate records under rule 6(2) of Cenvat Credit Rules, 2002/2004 and as the assessee did not fulfill the condition under Cenvat Credit Rules, 2002/2004, therefore, they were required to pay an amount as per Rule 6(3) of Cenvat Credit Rules, 2002/2004.
Accordingly, the Show Cause Notice was issued to the assessee proposing the following actions:-
       i.        As to why the amount of Rs. 25,25,892/- should not be recovered from them under Rule 14 of Credit Rules 2004 read with Proviso to Section 11A(1) of Central Excise Act, 1944.
      ii.        As to why interest under Section 11 AB of Central Excise Act, 1944, read with Rule 14 of Credit Rules 2004 should not be charged from them.
     iii.        As to why Penalty under Rule 15(2) of Credit Rules 2004 read with Section 11 AC of Central Excise Act, 1944 should not be imposed upon them.

Assessee’s Contention:The assessee made following contentions before the adjudicating authority:-
1.    It was submitted that the assessee has availed Cenvat credit on inputs i.e. industrial gases (Argon, Nitrogen, Hydrogen + Argon) which have been used in the manufacture of dutiable final product and also in the manufacture of exempted goods on job work basis under notification no. 214/86-CE dated 25.03.1986. They further submitted that as the job work was done under the above mentioned notification which itself means that the party getting its job done undertakes to process or clear the goods being supplied on payment of duty and that liability of duty is at its end thereby proving the fact that the final goods are dutiable and cleared on payment of duty. In other words, the job work done by them can be taken as intermediate product for the party. Since the ultimate manufacturer of such goods has paid duty on his final product there is no need of reversal of Cenvat Credit on the goods removed after doing job work. This ratio decindendi has been laid down by the Hon’ble Tribunal in the following cases:-

a)        Ballarpur Industries v/s CCE [2002 (48) RLT 221]
b)        Indian Smelting & Refining Co. Ltd. & ANR. v/s CCE, Mumbai[2003 (57) RLT 948]
c)         CCE, Chennai v/s M/s UCAL Machine Tools Ltd.-CESTAT, Chennai [2006 (74) RLT 511 (T.)]

These decisions are clearly applicable in the present case and in the light of above, it is clear that when ultimately the duty is payable on the final product, there is no need for reversing the 10% of the value of exempted goods cleared after doing the job work. Hence, the show cause notice is not sustainable and is liable to be set aside.

2.    It was submitted that the CENVAT Credit facility is allowed to streamline the process of payment of duty and to prevent the cascading effect if duty is levied both on the inputs and the finished goods. Rule 57D(2) shows that in the manufacture of a final product an intermediate product may also come into existence. Thus, in cases where intermediate product may also come into existence, credit would be allowed on it so long as duty is paid on the final product. The same view was taken by hon’ble Supreme Court in the cases cited below:-

a)           Escort v/s CCE [2004 (171) ELT 145 (SC)]

b)           Sterlite Industries (I) Ltd. v/s CCE, Pune-I [2005 (183( ELT 353 (Tri.             LB)]


The above stated decision of larger bench also pertains to job work as well as reversal of Cenvat Credit under Rule 6(2) of Cenvat Credit Rules, 2004. Hence it is clearly applicable in the present case also. There is clear cut judicial pronouncement in aforesaid decision that there is no need of reversing the credit when certain inputs are used in the job work.

Moreover, the appeal filed by the department against the order of larger bench in case of Sterlite Industries Ltd before Mumbai High Court has been dismissed by the hon'ble court.

Furthermore, referring the decision given in Sterlite Industries case, even stay of pre-deposit has been granted in the case of Tata Motors Ltd. vs Union of India [2009(244) ELT 337(Bom.)].

Keeping in view the above decisions, there is no need to reverse 10% Credit on the goods removed after job work as duty is paid by the ultimate manufacturer. As such, the show cause notice is not legally sustainable and is liable to be quashed.

3.    It was submitted that the Central Excise Rules and Notifications should be construed harmoniously so as to fulfill the purpose of their introduction in the law. The provisions of disallowing Cenvat Credit on exempted goods are contained in Rule 6(1) of the Cenvat Credit Rules, 2004 earlier known as Rule 57C. The text of Rule 57C is produced as follows:-
“(1)      No Credit of the specified duty shall be allowed on such quantity of inputs which is used in the manufacture of final products which are exempted from the whole of the duty of excise leviable thereon or are chargeable to nil rate of duty except when the final products are either:-
(i)            cleared to a unit in a Free Trade Zone; or
(ii)           cleared to a hundred per cent export-oriented undertaking; or
(iii)          cleared to a unit in Electronic Hardware Technology Park or Software Technology Parks; or
(iv)          supplied to the United Nations or an international organization for their official use or supplied to projects funded by them, on which exemption of duty is available under notification of the Government of India in the Ministry of Finance (Department of Revenue) No. 108/95-Central Excise, dated the 28^th August, 1995.

(2)    Where a manufacturer avails of the Credit of specified duty on any inputs and he is engaged in the manufacture of any final product which is chargeable to duty as well as in the manufacture of any other final product which is exempt from the whole of the duty of excise leviable thereon or is chargeable to nil rate of duty in the same factory, the provisions of sub-rule (1) shall be deemed to be satisfied only when the provisions of sub rule (1) or sub-rule (5) or sub-rule (9) of the rule 57CC are complied with, or where the goods are exported under bond in terms of provisions of rule 13.”
            The provisions of reversing 10% Credit on exempted goods in case of common inputs is contained in Rule 6(3)(i) of the Cenvat Credit Rules, 2004 which is produced as follows:-
            (i) the manufacturer of goods shall pay an amount equal to ten per cent of value of the exempted goods and the provider of output service shall pay an amount equal to ten per cent of value of the exempted services; or
            The job work can be done either under Rule 4(5)(a) or under Notification no. 214/86-CE dated 25.3.1986. When the job work is done under Rule 4(5)(a), there is no need of reversing10% as goods so cleared are neither chargeable to nil rate of duty nor they are exempted. And Rule 57CC or Rule 6(2) is applicable only when some goods are chargeable to nil rate of duty or are exempted. Further when job work is done while availing benefit of Notification no. 214/86; the interpretation of this Notification alongwith the aforesaid Rule 6(2)/57CC should be done in a harmonious manner. Otherwise, the purpose of introducing these Rules or notification will be defeated. This contention is being supported by the case of Jindal Polymers vs. CCE, Meerut-III [2001 (43)RLT 680]. The relevant para from this case is produced as follows:-
            “The alternate submission of the assessees is that Notification 214/86 under which the department alleges that they cleared polyster chips without payment of duty is not in the nature of a Notification hit by the bar of Rule 57C of the Central Excise Rules. They submit that the principle laid down in the decision of the Tribunal in the case of Bajaj Tempo Ltd. reported in 1994 (69) ELT 122 relating to applicability of Rule 57C vis a vis Notification 217/86 wherein the Tribunal held that Rule 57C and Notification 217/86, dated 2-4-1986 are to be harmoniously construed so as to avert payment of duty at each stage and postpone availment of credit to the final stage of manufacture, is equally applicable in the context of Notification 214/86 which is relevant to the present issue.”
The above decision is equally applicable in the present case and in the light of above, it is clear that the Rules and Notifications are issued for the purpose of facilitating the assessees for better compliance of law and hence, they should not be read rigidly. Rather, a sophisticated analysis of the same will serve the purpose for which these are enacted. If these rules and notifications will be read as such, the ultimate aim of their formation, i.e. removing the cascading effect of duty will not be fulfilled. Thus, the show cause notice is not viable and it should be quashed and no demand should be raised against them.
4.    They submitted that they have rightfully taken the Cenvat Credit on the inputs used in the manufacture of goods cleared under Notification no. 214/86 and there is no need of reversing the same @ 10% of the value of such goods. As such, the penalty under Section 11AC is not imposable on them. Even if the contention of the department is accepted then also penalty is not imposable as they acted under bonafide belief that no penalty is warranted. It has been held in the various cases that when any act is done under bonafide belief no penalty is imposable. Some of such cases are cited as follows:-

a)           Sri Krishna Alloys vs Commissioner of Central Excise, Salem [2006 (200) ELT 158 (Tri.-Chennai)]

b)           Asha Pavro Electronics Pvt. Ltd. vs. Commr. Of C. Ex., Mumbai-III [2002 (143) ELT 543 (Tri.-Mumbai)]

c)            Navbharat Explosive Co. Ltd. vs CCE, Raipur [2005 (187) ELT 218 (Tri.-Del.)]

d)           Super Polyfabriks Ltd. vs. Collector of Central Excise, Chandigarh [1999 (114) ELT 1019 (Tribunal)]
The above decisions are equally applicable in the present case also because the assessee were under bona fide belief based on above judgments that no penalty is chargeable on them. Hence it is crystal clear that the show cause notice is not viable and is liable to be quashed.
5.    During the course of hearing, it was reiterated that the issue under consideration is no longer res integra and has been settled by decisions given by various High Courts. They further submitted that they had placed reliance on the judgment of Larger Bench in the case of Sterlite Industries (I) Ltd. v/s CCE, Pune-I [2005 (183( ELT 353 (Tri.-LB)] wherein it was held that “Job worker, who received goods from manufacturer under Rule 57E of erstwhile Central Excise Rules, 1944 entitled to take credit of duty in respect of other inputs received directly and used by him in manufacture of said goods on job work basis”.

It is submitted that Revenue had filed appeal against the judgment of Larger Bench in High Court in Central Excise Appeal No. 76 of 2008. The Hon’ble Bombay High Court had upheld the judgment given in the case of Sterlite Industries [2009 (244) ELT A89 (BOM)] and dismissed the appeal of the Revenue. In this order it was observed that the learned Tribunal had relied on the Judgment in Escorts Limited v/s Commissioner of central Excise, Delhi [2004-TIOL-72-SC-CX]= [2004 (171) ELT 145 (SC)] and that nothing was pointed out to the Court as to why the judgment could not be applied and accordingly held that no question of law arises and consequently dismissed the appeal. It is worth mentioning that this decision has attained finality as further appeal was not filed by the Revenue.
Similarly, the Hon’ble High Court of Punjab and Haryana has also delivered judgment on the same issue in favour of the assessee. In the case of Commissioner of Central Excise v/s Happy Forging Ltd [2011 (265) E.L.T. 197 (P & H)] the issue raised was that whether provision of Rule 6 of the Cenvat Credit Rules, 2004 regarding disallowance of Cenvat credit on the inputs used in the manufacture of final product which are exempt from duty, are not attracted in case of goods cleared without payment of duty under Notification No. 214/86-CE dated 25.03.1986. T
Thus, in view of the judgments given by the Hon’ble High Court of Punjab & Haryana and the Bombay High Court, the issue is settled in their favour. Therefore, it was submitted that the proceedings initiated by the impugned show cause notice should be set aside.

6.    The decision given in the case of Sterlite Industries was followed in the following cases:-

·         TATA MOTORS LIMITED V. UNION OF INDIA [2009 (244)ELT 337 (BOM.)
·         COMMISSIONER OF C. EX., LUDHIANA VERSUS JAINSONS WOOL COOMBERS LTD [2011 (268) E.L.T. 360 (P & H)]
In light of the above cited decisions, the impugned show cause notice proposing to recover 10%/5% of the value of exempted goods cleared under job work is liable to be quashed.

7.    Aligning with the above, it is also worth observing that proceedings for recovery of 10%/5% of the exempted value of goods that were cleared on job work basis initiated against 15 parties have been dropped by the Hon’ble Commissioner, Central Excise Commissionerate, Jaipur-II vide Order in Original no. 65-79/2012/C.Ex./JPR-II-Commissioner dated 26.10.2012 by relying on the decision given in the case of Sterlite Industries by the Hon’ble Bombay High Court having citation as [2009 (244) ELT A89 (BOM)].Moreover, the revenue department has also not preferred appeal against the above order in original and so the order has attained finality. Therefore, the benefit of the above cited order in original passed by the same commissionerate should be extended to them and the proceedings initiated vide the impugned show cause notice must be dropped.

8.    It was also submitted that they have availed Cenvat credit on inputs i.e. industrial gases such as Argon, Nitrogen, Hydrogen+ Argon etc. and inputs such as oils, lubricant oil, Rushtop oil, C.I. Sheets etc. and lubricants etc. which have been used in the manufacture of dutiable final product and also in the manufacture of exempted goods on job work basis under notification no. 214/86-CE dated 25.03.1986. They further submitted that as the job work was done under the above mentioned notification which itself means that the party getting its job done undertakes to process and clear the goods job worked on payment of duty and that liability of duty is at its end. This proves the fact that the final goods are dutiable and cleared on payment of duty. In other words, the job work done by them can be taken as intermediate product for the party. Since the ultimate manufacturer of such goods has paid duty on his final product there is no need of reversal of Cenvat Credit on the goods removed after doing job work. This ratio decindendi has been laid down by various High Courts as stated above. They submit that these decisions are clearly applicable in their case and in the light of above, it is clear that when ultimately the duty is payable on the final product, there is no need for reversing the 10%/5% of the value of exempted goods cleared after doing the job work. Hence, the show cause notice is not sustainable and is liable to be set aside.

9.    They submitted that they have rightfully taken the Cenvat Credit on the inputs used in the manufacture of goods cleared under Notification no. 214/86 and there is no need of reversing the same @ 10% /5% of the value of such goods. As such, the penalty under Rule 15(2) of the Cenvat Credit Rules, 2004 is not imposable on them. Even if the contention of the department is accepted then also penalty is not imposable as they have acted under bonafide belief for which no penalty is warranted. It has been held in various cases that when any act is done under bonafide belief no penalty is imposable. It has been held in the case of COMMISSIONER OF CENTRAL EXCISE, TRICHY VERSUS GRASIM INDUSTRIES LTD. [2005 (183) E.L.T. 123 (S.C.)] that where the act of assessee is based on the interpretation taken by the Tribunal, penalty cannot be imposed as the act is based on bonafide belief. The verdicts of Apex Court are produced as follows:-
“Penalty - Bona fide belief caused by Tribunal’s decision - Tribunal in a number of cases giving an interpretation as understood by assessee - Penalty not imposable - Rule 173Q of erstwhile Central Excise Rules, 1944 - Rule 25 of Central Excise Rules, 2002. [para 20]”
The analysis of above decision makes it clear that since they have acted under bonafide belief, no penalty can be imposed on them. As such, the impugned show cause notice proposing to levy penalty on them deserves to be dropped.

Reasoning of Judgment:
The adjudicating authority has carefully gone through the case records i.e. Show Cause Notice and the submissions made in the written replies of the assessee and the case laws cited by them. The main allegation in the Show Cause Notices is that parties have availed of Cenvat Credit on certain inputs which were used as inputs in manufacture of goods cleared on payment of duty as well as the goods which were manufactured on job work basis and cleared without payment of duty under exemption Notification No. 214/86-CE dated 25.03.86. The Show Cause Notices allege that since the inputs used in the manufacture of job work goods were not separately accounted for and stored as required under Rule 6(2) of Cenvat Credit Rules, the parties were liable to pay an amount equal to 5% or 10% (as applicable at the relevant time) on the value of goods cleared in terms of Notification No. 214/86-CE dated 25/03/86.

In order to appreciate the issue properly it would be proper to go through the rules and Sub rules of Rule 6 as these existed at the relevant time. Sub Rule (1) of Rule 6 provided that Cenvat Credit shall not be allowed on such quantity of inputs which is used in the manufacture of goods except in such circumstances mentioned in Sub Rule (2). The Sub Rule (2) which is obviously an exception to Sub Rule (1) read as under:

Rule (6) (2): where, a manufacturer avails of CENVAT Credit in respect of any inputs except input intended to be used as fuel and manufactures such, final products which are , chargeable to any duty as well as exempted goods, then the manufacturer shall maintain separate accounts for receipt, consumption and inventory of inputs meant for use in the manufacture of dutiable final products and the quality of inputs meant for use in the manufacture of exempted goods and take Cenvat Credit only on that, quality of inputs which is intended for use in the manufacture of dutiable goods.

With effect from 16.5.2005 the words "except inputs intended to be used as fuel, were omitted from the above Sub Rule (2). Sub Rule (3) of Rule 6 further provided that in case the manufacturer does not maintain separate accounts for receipt, consumption and inventory of inputs meant for use in the manufacture of dutiable goods and exempted goods he shall be liable to pay an amount @ 5%,8%, or 10 % (as applicable at the relevant time) of the value of exempted goods. As discussed above, the main issue is whether the notices were required to pay such amount @ 5%, 8%, or 10 % on value of goods cleared under exemption in terms of Notification No. 214/86, as there is no dispute that they had not maintained separate records of inputs used in manufacture of goods cleared on payment of duty and under exemption.

The whole thrust of the arguments of the assessee is that though they had not maintained separate accounts of the receipt, consumption and inventory of inputs used in the manufacture of goods which were cleared by them under Notification No. 214/86-CE dated.25.03.86 but they were not liable to pay any amount in terms of Rule 6 (3) of Cenvat Credit Rules as the goods cleared after availing exemption under Notification No. 2l4/86-CE dated 25.03.86 were not actually exempted goods for the purpose of Sub Rule (2) and (3) of Cenvat Credit Rules. They have cited various case laws in which CESTAT has held that goods on which exemption under Notification No. 2l4/86-CE dated 25.03.86 is availed are not at par with exempted goods since such goods are actually supplied to the principal manufacturers who use such goods in further manufacture of final goods which are eventually cleared as per prescribed procedures.

It was found that the issue was most precisely dealt with by Larger Bench of Tribunal in the case of Sterlite lndustries Ltd. Vs, CCE, Pune, [2005(183) ELT 353- T-LB]. Though the relevant rules involved in the said case was Rule 57 C of the then Central Excise Rules, 1944 which also provided that Cenvat credit shall not be allowed on the inputs used in the manufacture of exempted goods but the ratio of the judgment is applicable to the instant proceedings also. The Hon'ble Tribunal discussed the issue at length in the Para 3 of the said order and held that the credit on inputs used in the manufacture of inputs used in the manufacture of final product cleared under job work basis not hit for Rule 57C of the then Central Excise Rules. Para 3 of this judgment is reproduced as under:

We are also in agreement with the appellant's contention that Rule 57C debars taking of credit in respect of the inputs used in the manufacture of the final product, if final product is exempted from the whole of duty of excise leviable thereon or chargeable to nil rate of duty. As such, to attract the provisions of Rule 57C, two situations in respect of the final product should be satisfied. Either the final product should be exempted which situation can arise only when there is an exemption notification issued under Section 5A of the Central Excise Act or the final product is chargeable to nil rate of duty. Expression chargeable to nil rate of duty or exempted from whole of duty was considered by the Tribunal in the case of Orissa Synthetics Ltd. v. Collector of Central Ex. [1995 (77), E.L.T. 350 (Tri.) and after taking note of the Ministries clarifications issued vide Circular No. 10/75/CX.6, it was held that clearance under goods under provision of 191BB for export without payment of duty would not get covered in the above expression. Reference was made to the advice received from the Ministry Of Law dealt in the paragraph of 9 in the said decision. It was opined in the said letter of the Law Ministry that the term exempted has a wide connotation. The same was attributed to the Notification issued by the Central Government. Similarly, the chargeable to nil rate of duty would refer to the tariff rate being nil and the goods cleared terms of provision of Rule 199BB would not be covered by the said expression inasmuch as the same are not chargeable to nil rate. In the present case, we find the job worker could have cleared the goods on payment of duty and manufacturer could have claimed credit of the same. It is only under the special procedure laid down in terms of the Rule 57F(3) that the duty does not get paid at the job worker's end at the time of clearance of the goods, but ultimately gets paid at manufacturer’s end. In these circumstances we are in agreement with the decision rendered in the case of Bajaj Tempo and Jindal Polymers."

The above Order of the tribunal was upheld by the Bombay High Court reported at [2009 (244) ELT - A- 89] which has also been accepted by the department.

As discussed in the preceding paragraphs, goods cleared without payment of duty in terms of Notification No. 214/86-CE dated 25.03.86 though technically exempted goods, but still the same cannot be equated with exempted goods which are finally cleared for home consumption or export in as much as such goods are intermediate goods which are further used by principal manufacturer in the manufacture of final goods which are cleared on payment of duty. In fact the exemption Notification No.214/86-CE dated 25.03.86 is not exactly an absolute exemption but a procedure to enable manufacturer to engage in job work for others and supply the goods to such principal manufacturers. Even otherwise if the job worker pays duty on such intermediate goods, the principal manufacturer would be eligible to take Cenvat Credit of such duty.

In view of the above discussions and findings, it was concluded that the demands for reversal of CENVAT credit of the goods or an amount equal to 5% or 10% (as applicable at the relevant time) of the value of goods cleared under Notification No. 214/1986-CE dated 25-03-1986 are not sustainable in view of the settled law quoted as above.

Decision:-Proceedings initiated vide show cause notice were dropped.

Conclusion:- The analogy that we can derive from this case is that Job worker is entitled to CENVAT credit on inputs used in manufacture of goods by availing exemption under Notification No 214/86 CE. It has been concluded by the High Court that although the job worker clears goods without payment of duty under notification no. 214/86, but still, the job worker should be allowed to avail the credit on inputs used by him in the manufacture of such goods because ultimately the principal manufacturer discharges excise duty on clearance of the final product. Moreover, allowing credit to the job worker will facilitate the effective implementation of cenvat credit scheme and would facilitate in avoiding the cascading effect.

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