Cenvat Credit on duly received inputs cannot be denied absent proof of non-receipt or diversion by the recipient manufacturer.

Cenvat credit cannot be denied merely because the input supplier allegedly failed to pay duty or lacked a proper mother invoice, where the recipient manufacturer received the goods under supporting invoices and transport documents, entered them in statutory records, paid through banking channels, and used them in the manufacture of dutiable final products. The department must rebut actual receipt of inputs or prove diversion or use of alternative raw material; a challenge to the supplier's antecedent procurement is not enough. The credit was therefore sustained, and the recipient was entitled to retain it.

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Issues: Whether Cenvat credit could be denied on the allegation that the input supplier had not paid duty or had no proper mother invoice, when the inputs were received under invoices and supporting documents, entered the factory, were accounted for in statutory records, and were used in manufacture of dutiable final products.

Analysis: The input invoices were supported by transport documents and trade tax verification, the goods were recorded on receipt, payments were made by cheque or demand draft, and the finished goods were cleared on payment of duty. The Commissioner (Appeals) also relied on the Board circular indicating that the recipient manufacturer is not expected to verify whether the supplier has discharged duty. In such circumstances, credit cannot be denied merely because the supplier's own antecedent procurement was questioned, particularly when the department failed to disprove actual receipt of goods or establish use of some alternative raw material.

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

Final Conclusion: The appellate order allowing credit was upheld and the revenue challenge failed.

Ratio Decidendi: Cenvat credit cannot be denied where receipt of inputs under valid documents and their use in manufacture are established, and the department fails to rebut actual receipt or prove diversion by the buyer.

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