Deemed Cenvat credit under compounded levy rules survives without proof of actual duty payment when prescribed invoice declarations are present.

Deemed Cenvat credit under the compounded levy scheme was held admissible where the invoice carried the prescribed declaration under Rule 96ZP(3), and credit could not be denied merely because proof of actual duty payment was not produced. The prescribed declaration was treated as sufficient to establish receipt of duty-paid material for the notification governing deemed credit, and any non-payment of duty by the supplier was a matter for recovery from the supplier, not the recipient. Penalties were also found unwarranted on the facts, and the revenue appeals failed.

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Issues: Whether deemed Cenvat credit could be denied merely because proof of actual duty payment was not produced, where the goods were cleared under Rule 96ZP(3) and the invoice carried the relevant declaration, and whether penalties were warranted.

Analysis: Deemed credit is not predicated on production of a conventional duty-paying document. Where the goods are shown to have been cleared under the compounded levy scheme and the invoice contains the requisite declaration under Rule 96ZP(3), the receipt of duty-paid material is to be treated as established for the purpose of the notification governing deemed credit. If duty was in fact not discharged by the supplier, the revenue's remedy lies against the supplier and not against the recipient who availed credit on the basis of the prescribed declaration. The order also accepted that, in the facts of the case, penalties were not justified.

Conclusion: Deemed Cenvat credit was admissible and could not be denied on the ground of absence of proof of actual duty payment. Penalties were not warranted. The revenue appeals failed.

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