CENVAT credit on duty-paid inputs survives later lower final assessment where credit was taken on proper invoices.

CENVAT credit cannot be denied to a recipient manufacturer where the input supplier had actually paid duty at clearance under provisional assessment and the recipient took credit on valid statutory invoices. Subsequent finalisation of the supplier's assessment at a lower duty liability does not, by itself, justify reversal of the recipient's credit when no refund of the excess duty was claimed by the supplier. On that basis, the demand for credit reversal, interest, and penalties was unsustainable, and the assessee's entitlement to retain the credit was upheld.

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Issues: Whether a recipient manufacturer can be denied CENVAT credit of duty actually paid by the input supplier merely because the supplier's provisional assessment was later finalised at a lower duty liability, and whether the related demand, interest, and penalties can stand.

Analysis: The governing rule allowed credit of duty paid on inputs, not merely duty that ought to have been paid on a later re-assessment. The input suppliers had paid duty at the time of clearance under provisional assessment, the recipient units had taken credit on the strength of statutory invoices, and no refund of the excess duty had been claimed by the suppliers. On this footing, the recipient's credit could not be varied or reversed by reference to the supplier's subsequent final assessment. The demand for reversal of credit, the associated interest, and the penalties were therefore unsustainable.

Conclusion: The issue was decided in favour of the assessee and against the Revenue; the assessees were entitled to retain the CENVAT credit actually taken on the duty paid by the suppliers.

Final Conclusion: The batch of appeals was resolved by sustaining the assessee's entitlement to credit and by rejecting the Revenue's challenge to the credit, interest, and penalty demands.

Ratio Decidendi: CENVAT credit cannot be denied at the recipient's end when the supplier has actually paid duty on the inputs and the credit is taken on proper invoices, even if the supplier's provisional assessment is later finalised at a lower duty liability, so long as no refund of the excess duty has been claimed.

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