Cenvat credit on sister-unit inputs was upheld where duty was actually paid and the arrangement was revenue-neutral.

Cenvat credit on inputs received from a sister unit cannot be denied merely because the sister unit had the benefit of Notification No. 214/86-C.E. where the goods were cleared on payment of duty. The credit was claimed only to the extent of duty actually paid by the input-manufacturer, and the applicable precedent treated such availment as revenue-neutral when the credit exactly matched the duty paid. On that basis, the contrary view relied on by Revenue was not followed, and the credit was held admissible.

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Issues: Whether Cenvat credit of duty paid on inputs received from a sister unit could be denied on the basis of Notification No. 214/86-C.E. when the goods were cleared on payment of duty.

Analysis: The credit claimed was on duty actually paid by the sister unit on the inputs supplied to the appellant. The denial was sought only on the footing that the sister unit had the benefit of Notification No. 214/86-C.E. The applicable precedent held that such credit cannot be denied in these circumstances, and where the credit availed is exactly equivalent to the duty paid by the input-manufacturer, the situation is revenue-neutral. On that basis, the contrary view relied on by the Revenue was not followed.

Conclusion: The appellant was entitled to the Cenvat credit and the denial was unsustainable.

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