Cenvat credit restrictions on dealer invoices: credit on a third stage dealer's bills was held inadmissible.

Cenvat credit was held inadmissible where the supporting invoices were issued by a third stage dealer, because Rule 7 of the Cenvat Credit Rules, 2002 permitted credit only on invoices issued by a first stage or second stage dealer. As the supplier in the chain was not an authorised dealer stage, the documents could not validly support availment of credit. The consequent demand, interest and penalty were therefore sustained.

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Issues: Whether cenvat credit could be availed on the basis of invoices issued by a third stage dealer under Rule 7 of the Cenvat Credit Rules, 2002.

Analysis: Credit under Rule 7 was available only on invoices issued by a first stage or second stage dealer. The record established that the supplier from whom the appellant procured the goods was a third stage dealer, having purchased the goods through an intervening dealer chain. Since the invoices relied upon were not issued by a dealer authorised by the rule, the documents could not support availment of cenvat credit. The finding that the credit was wrongly taken therefore suffered from no legal infirmity.

Conclusion: The appellant was not entitled to cenvat credit on the invoices issued by the third stage dealer, and the demand, interest and penalty were sustainable.

Ratio Decidendi: Cenvat credit can be validly availed only on invoices issued by dealers authorised under the governing rule, and credit taken on invoices of an unauthorised dealer stage is inadmissible.

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