Bona fide Cenvat credit cannot be denied where invoices, records, and manufacturing use are properly established.

Cenvat credit cannot be denied to a manufacturer who received inputs under proper dealer invoices, recorded the goods in statutory registers, used them in manufacture, and paid by cheque, merely because the first stage dealer allegedly sourced the goods from a non-existent supplier. Where the recipient has complied with invoice requirements and the precautions contemplated by the Cenvat Credit Rules, the movement and use of goods are established, and the recipient is not required to verify the supplier's internal records beyond matters within its control. The Board's circular on bona fide consignee transactions supports allowance of credit in such circumstances.

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Issues: Whether Cenvat credit can be denied to a manufacturer who received inputs under proper dealer invoices, recorded the receipt in its statutory records, used the goods in manufacture, and paid for them by cheque, merely because the first stage dealer allegedly procured the goods through a non-existent supplier.

Analysis: The recipient had complied with the invoice requirements and had taken precautions contemplated under Rule 7(4) of the Cenvat Credit Rules, 2002 and Rule 9(5) of the Cenvat Credit Rules, 2004. The goods were shown to have moved from the dealer to the recipient, were accounted for in the recipient's records, were used in manufacture, and the final products were cleared on payment of duty. The recipient was not required to verify the internal records of the supplier or dealer beyond what was within its control. The Board's circular on bona fide consignee transactions supported the view that credit should not be denied when the consignee's transaction is bona fide and statutory formalities are satisfied.

Conclusion: Cenvat credit could not be denied to the recipient on the ground that the first stage dealer had fraudulently sourced the goods; the Revenue's challenge failed.

Ratio Decidendi: A bona fide recipient who receives goods under proper invoices, accounts for them, and uses them in manufacture is entitled to Cenvat credit, and such credit cannot be disallowed merely because the dealer or an earlier supplier is found to be fraudulent or non-existent.

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