Cenvat credit on valid invoices remains admissible despite supplier default, and a time-barred demand cannot be enforced.

Cenvat credit was held admissible where a recipient-manufacturer received inputs under duly authenticated excise invoices, actually used the goods in manufacture, and acted bona fide with reasonable precautions; the supplier's later default in duty payment did not justify reversal of the credit. The demand was also held unenforceable because the show cause notice was issued beyond the prescribed limitation period. The overall result stated in the text is that the appeal succeeded, as the credit was correctly availed and the demand was time barred.

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Issues: (i) whether Cenvat credit was admissible to the recipient-manufacturer when the input manufacturer defaulted in payment of duty after clearance of goods, and (ii) whether the demand was barred by limitation.

Issue (i): whether Cenvat credit was admissible to the recipient-manufacturer when the input manufacturer defaulted in payment of duty after clearance of goods.

Analysis: The inputs were received under duly authenticated excise invoices showing duty as payable, the goods were actually received and used in manufacture, and the appellant had acted on bona fide belief after taking reasonable precautions. The Board's circular clarified that credit taken by a user-manufacturer is not to be reversed merely because the input manufacturer subsequently defaults in payment of duty. The invoices also satisfied the prescribed requirements.

Conclusion: Cenvat credit was admissible and its reversal could not be directed. The issue was decided in favour of the assessee.

Issue (ii): whether the demand was barred by limitation.

Analysis: The show cause notice was issued beyond the prescribed period and the demand was therefore hit by limitation.

Conclusion: The demand was time barred. The issue was decided in favour of the assessee.

Final Conclusion: The appeal succeeded because the credit was held to be correctly availed and the demand itself was found to be barred by limitation.

Ratio Decidendi: A recipient-manufacturer cannot be denied Cenvat credit on validly received inputs merely because the supplier later defaults in duty payment, where the recipient acted bona fide and complied with the prescribed invoice requirements; a demand raised beyond limitation is unenforceable.

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