Cenvat credit on duty-paid inputs stored outside the factory could not be denied without considering binding precedent and circulars.

Duty-paid inputs that were received, accounted for, and stored outside the factory under departmental permission could not justify denial of Cenvat credit, penalty, or confiscation when there was no allegation of clandestine removal or misuse. The adjudicating authority's failure to consider the cited Tribunal precedent and the Board circular recognising such storage where factory space was inadequate was treated as a defect in adjudication. The order denying credit and imposing consequential penalties was therefore not sustained, and the matter was remanded for fresh decision after considering the relevant case law and circular.

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Issues: Whether Cenvat credit, penalty and confiscation could be sustained when duty-paid inputs were stored outside the factory premises under departmental permission, and the adjudicating authority failed to consider binding precedent and the Board circular permitting such storage.

Analysis: The inputs were duty paid, received and accounted for, and there was no allegation of clandestine removal or use otherwise than in the prescribed manner. The arrangement of storing inputs outside the factory had been permitted by the departmental authority, and the record showed reliance on a Board circular recognizing such storage where factory space was inadequate. The adjudicating authority, however, did not consider the cited Tribunal decision or the circular while confirming the demand, penalty and confiscation. Non-consideration of relevant precedent and administrative instructions was treated as a defect affecting fair adjudication.

Conclusion: The denial of credit and the consequential penalty and confiscation could not be sustained on the order as passed, and the matter was remanded for fresh decision after considering the cited case law and circular.

Ratio Decidendi: Where duty-paid inputs are received, accounted for, and stored outside the factory under a recognized permission regime, credit cannot be denied merely on a technical lapse without considering binding precedent and applicable circulars.

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