Cenvat credit cannot be denied where duty was actually paid on inputs, despite the supplier's exemption claim.

Cenvat credit on inputs cannot be denied to the recipient merely because the inputs were exempt under Notification No. 6/2006-C.E. if duty was in fact paid by the manufacturer. The recipient's entitlement depends on actual duty payment, and the supplier's assessment cannot be reopened at the recipient's end to disallow credit. On that basis, denial of credit was held unsustainable, the impugned orders were set aside, and the assessee succeeded with consequential relief.

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Issues: Whether Cenvat credit of duty paid on inputs could be denied to the recipient on the ground that the inputs were exempted under Notification No. 6/2006-C.E. and that duty ought not to have been paid by the manufacturer.

Analysis: Cenvat credit is available to the recipient when duty has in fact been paid on the inputs. The assessment or treatment of the transaction at the supplier's end cannot be reopened at the recipient's end for denying credit. The availability of credit is therefore governed by the fact of duty payment and not by a retrospective challenge to the supplier's assessment.

Conclusion: The denial of Cenvat credit was not sustainable and the issue was decided in favour of the assessee.

Final Conclusion: The impugned orders were set aside and the appeals succeeded with consequential relief.

Ratio Decidendi: Where duty has been paid on inputs, Cenvat credit cannot be denied to the recipient by reopening the supplier's assessment at the recipient's end.

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