Cenvat credit on replacement capital goods depends on duty-paid receipt and use, not on insurance reimbursement funding.

Cenvat credit on capital goods could not be denied merely because the goods were received as replacement under a reinstatement insurance policy. The decisive factors were that the goods were duty paid, supported by proper duty-paying documents, and their receipt and use were not disputed. The source of funding or the insurer's reimbursement arrangement did not affect statutory eligibility for credit. Where the department accepted the duty-paid character of the goods and their receipt, denial of credit was unwarranted.

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Issues: Whether Cenvat credit could be denied on capital goods received as replacement under a reinstatement insurance policy when the duty paid nature of the goods and receipt thereof were not in dispute.

Analysis: The entitlement to credit depended on the receipt of duty paid capital goods accompanied by proper duty paying documents. The arrangement between the assessee and the insurer regarding reimbursement or replacement under the reinstatement policy did not affect the statutory eligibility to avail credit, since the source of funding for the purchase of the capital goods was not material to the credit entitlement. As the department did not dispute the duty paid character of the goods or their receipt and use by the appellant, denial of credit was unwarranted.

Conclusion: Cenvat credit could not be denied, and the assessee succeeded on the issue.

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