Cenvat credit cannot be denied for procedural lapse when duty is actually paid on inputs and no revenue loss arises.

Cenvat credit could not be denied merely because the procedure under Notification No. 44/2001-CE(NT) was not followed while procuring inputs against Advance Licence or Advance Authorization through ARO or invalidation letter. The governing notification and related rules did not make that duty-free clearance procedure the sole mandatory condition in these facts. Since the suppliers had in fact paid duty from PLA and had not claimed refund of terminal excise duty, the Revenue's objection of credit shifting failed. As duty had actually been paid on the inputs and no revenue loss was shown, the assessees were entitled to Cenvat credit.

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Issues: Whether Cenvat credit of duty paid by suppliers could be denied merely because the procedure under Notification No. 44/2001-CE(NT) dated 26.6.2001 was not followed while procuring inputs against Advance Licence or Advance Authorization through ARO or invalidation letter.

Analysis: The appellants had obtained ARO or invalidation letters and handed them over to the suppliers, but the procedure for duty-free clearance under the notification was not followed. The notification and the connected rules were examined and it was found that they did not make compliance with that procedure mandatory as the only permissible course in the facts of the case. It was also noted that the suppliers had paid substantial duty from PLA and had not availed refund of terminal excise duty, so the revenue's plea of shifting of credit was not supported. Since duty had actually been paid by the suppliers and the credit was being taken of that duty, there was no loss to Revenue.

Conclusion: Denial of Cenvat credit was not justified, and the assessees were entitled to the credit.

Ratio Decidendi: Where duty has in fact been paid on inputs and the governing notification does not compel a duty-free clearance procedure as the sole condition, Cenvat credit cannot be denied merely for non-following of that procedure, especially when Revenue suffers no loss.

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