Cenvat credit on imported inputs requires proof of transfer and actual use after factory takeover before denial is sustained.

Cenvat credit on additional customs duty for imported CRNGO steel sheets depends on proof that the duty-paid inputs were transferred to the new factory owner and actually used in manufacture. Where a factory is taken over, entitlement linked to inputs, work-in-progress or capital goods must be supported by proper transfer and accounting to the Commissioner's satisfaction. On the recorded facts, the imports were made by the earlier owner and the order did not determine whether the steel sheets were transferred to the appellant, consumed before takeover, or used by the appellant. The denial of credit was therefore unsustainable and the matter was remanded for de novo adjudication.

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Issues: Whether the appellant was entitled to Cenvat credit of the additional customs duty paid on imported CRNGO steel sheets after takeover of the factory, in the absence of clear findings on transfer and use of the inputs by the appellant.

Analysis: Cenvat credit is available only in respect of duty-paid inputs that are actually used by the manufacturer in or in relation to the manufacture of final products. Where a factory changes ownership, transfer of unutilized credit or input-linked entitlement depends upon the transfer of stock of inputs, work-in-progress, or capital goods and their due accounting to the satisfaction of the Commissioner. On the facts recorded, the imports were made by the earlier owner, the factory was taken over later, and the impugned order did not examine whether the steel sheets on which duty was eventually paid had been transferred to the appellant and used by it, or whether they had already been consumed before the takeover.

Conclusion: The matter required factual verification on transfer and use of the inputs, and the denial of credit could not be sustained without such examination. The order was set aside and the case remanded for de novo adjudication.

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