Cenvat credit verification duty limited to invoice-checking; consignee need not verify consignor's exemption claim or duty computation.

Cenvat credit taken on goods received from a 100% EOU was sustained because the consignee's obligation under Rule 7(2) of the Cenvat Credit Rules, 2002 was limited to verifying that the duty shown in the invoice had been paid. The consignee was not required to the correctness of the consignor's exemption claim or the legality of the consignor's duty computation. Prompt reversal of the irregular credit on noticing the issue also supported bona fide conduct, and the existence of the supplies was undisputed. The Department's challenge therefore failed and the appeal was rejected.

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Issues: Whether the Department's appeal was liable to succeed on the question of Cenvat credit taken on goods received from a 100% EOU and on the consignee's responsibility to verify the correctness of the consignor's exemption or duty payment.

Analysis: The credit dispute turned on the scope of the consignee's duty under Rule 7(2) of the Cenvat Credit Rules, 2002. The consignee was required to verify that the supplier had paid the duty indicated in the invoice, but was not cast with the further burden of ensuring the correctness of any exemption availed by the consignor or the exact legality of the duty paid by it. The demand was also weakened by the fact that the credit was reversed as soon as the irregularity was noticed, which supported bona fides, and there was no dispute that the supplies existed.

Conclusion: The Department's challenge failed and the appeal was rejected.

Ratio Decidendi: A consignee is not required to verify the correctness of the consignor's exemption or duty computation; its obligation is confined to checking the duty reflected in the invoice, and prompt reversal of irregular credit indicates bona fide conduct.

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