Cenvat credit cannot be denied for procedural lapses when receipt and end-use of duty-paid inputs are established.
Credit on duty-paid inputs was admissible where the bill of entry stood in the assessee's name and the goods were actually received in the factory, even though there was no specific endorsement for the Bhopal unit; the missing endorsement was treated as a procedural irregularity, so denial of credit was set aside. Credit was also admissible for inputs sent directly to a job worker, because the goods moved under a job-work arrangement and constructive delivery was accepted; the departure from the prescribed route did not defeat substantive entitlement. The related penalty was annulled because the record showed substantial compliance and no dispute on receipt or end-use of the inputs.
Issues: (i) Whether credit was admissible when the bill of entry stood in the name of the assessee's International Operations Division and was not specifically endorsed for the Bhopal factory. (ii) Whether credit could be denied where inputs were sent directly to a job worker and the processed goods were thereafter received back by the assessee.
Issue (i): Whether credit was admissible when the bill of entry stood in the name of the assessee's International Operations Division and was not specifically endorsed for the Bhopal factory.
Analysis: The bill of entry was in the assessee's name and the goods were shown to have been received in the factory through the stores receipt voucher. The absence of a specific endorsement for the factory was treated as a procedural irregularity. In the facts found, receipt and use of the goods for the intended purpose were not in dispute, and the denial of credit rested only on a technical lapse in the procedure.
Conclusion: Credit was held admissible on this issue and the disallowance was set aside.
Issue (ii): Whether credit could be denied where inputs were sent directly to a job worker and the processed goods were thereafter received back by the assessee.
Analysis: The inputs were sent directly to the job worker to avoid unnecessary transportation, and the job worker processed the goods under the job-work arrangement contemplated by Notification No. 214/86-C.E. The movement of inputs directly to the job worker was accepted as constructive delivery in the circumstances, and the procedural deviation from the prescribed route did not affect the substantive entitlement to credit.
Conclusion: Credit was held admissible on this issue and the disallowance was set aside.
Final Conclusion: The assessee was held entitled to the disputed credit, and the related penalty was also annulled because the procedural lapses did not defeat substantive compliance.
Ratio Decidendi: Where the receipt and end-use of duty-paid inputs are established, credit cannot be denied for mere procedural deviations if the assessee has substantially complied with the conditions for availment.
TaxTMI 
AI Drafter ✕
TaxTMI 
