Cenvat credit on supplementary invoices upheld, while extended limitation and penalty were not justified.

Cenvat credit on iron ore pellets was allowed where duty had been paid by the supplier and supplementary invoices were issued as duty-paying documents, with the Tribunal treating those invoices as valid for credit purposes. The Revenue's disallowance based on alleged short receipt was rejected, and the Tribunal followed case law supporting credit where duty is subsequently paid on inputs. The extended period of limitation under the proviso to Section 11A(1) was not justified on the facts, and the penalty was also not sustained. The Order-in-Original was set aside and the appeal was allowed with consequential relief.

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Issues: (i) Whether Cenvat credit was admissible on supplementary invoices where the supplier had paid duty on the differential quantity and issued duty-paying documents; (ii) Whether the demand was barred by limitation by reason of absence of suppression and departmental knowledge of the transaction.

Issue (i): Whether Cenvat credit was admissible on supplementary invoices where the supplier had paid duty on the differential quantity and issued duty-paying documents.

Analysis: The supplier had paid the duty demanded by the department and had issued supplementary invoices. Once duty has actually been paid into the exchequer and the recipient possesses duty-paying documents, the credit mechanism cannot be defeated merely because the quantity was disputed on the basis of alleged shortage or excess. The Tribunal held that, during the relevant period, supplementary invoices could not be denied as valid documents for availing credit, and the credit could not be disallowed when the duty burden had in fact been discharged by the manufacturer.

Conclusion: Cenvat credit was admissible, and the disallowance was unsustainable.

Issue (ii): Whether the demand was barred by limitation by reason of absence of suppression and departmental knowledge of the transaction.

Analysis: The record showed that the department was aware of the transactions between the units from an early stage, and there was no evidence of suppression or other conduct justifying invocation of the extended period. In such circumstances, the longer limitation period could not be applied to sustain the demand.

Conclusion: The demand was time-barred and the extended period could not be invoked.

Final Conclusion: The impugned order was set aside and the appeal was allowed with consequential relief.

Ratio Decidendi: Where duty has been actually paid by the supplier and valid duty-paying documents are issued, credit cannot be denied merely on a dispute about excess or short receipt; similarly, the extended limitation period is unavailable in the absence of suppression when the department was already aware of the transaction.

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