Cenvat credit cannot be denied where duty on inputs was paid, despite a dispute over the supplier's manufacturer status.

Cenvat credit could not be denied to the recipient of inputs merely because the supplier's status as manufacturer was disputed, where the inputs had been cleared on payment of duty and that duty payment was not in dispute. Rule 7 of the Cenvat Credit Rules, 2004 did not require the recipient to investigate and resolve the supplier's separate legal dispute before taking credit of duty already paid. The denial of credit was therefore not sustainable, and the recipient was entitled to retain the credit.

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Issues: Whether Cenvat credit could be denied to the recipient of inputs merely because a dispute existed regarding the supplier's status as manufacturer, despite the duty having been paid on the inputs.

Analysis: The inputs were cleared by the supplier on payment of duty and there was no dispute about such duty payment. In such circumstances, Rule 7 of the Cenvat Credit Rules, 2004 did not justify denial of credit to the recipient. The recipient was not required to investigate and resolve the supplier's separate legal dispute regarding its manufacturer status before availing credit of duty already paid.

Conclusion: The denial of Cenvat credit was not sustainable and the respondent was entitled to retain the credit.

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