Cenvat credit cannot be denied to the recipient when duty was paid on supplier clearances despite later dispute on manufacture.

Cenvat credit cannot be denied to a recipient merely because the supplier's activity is later treated as not amounting to manufacture, where duty was actually paid on the clearances. The recipient's credit entitlement cannot be defeated by reopening the supplier's assessment at the recipient end, especially when the supplier was not a party to the proceedings. On those facts, the denial of credit was unsustainable and the assessee remained entitled to avail the credit.

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Issues: Whether Cenvat credit could be denied to the recipient on the ground that the supplier's activity did not amount to manufacture and duty was wrongly paid by the supplier.

Analysis: The supplier of the input was not a party to the proceedings and there was no dispute that duty had been paid on the goods cleared by the supplier. The attempt to deny credit at the recipient end would amount to reopening the assessment of the supplier's clearances, which was not permissible. The legal position applied was that credit cannot be denied merely because the supplier's activity is later regarded as not amounting to manufacture.

Conclusion: The denial of credit was unsustainable and the assessee was entitled to the credit.

Ratio Decidendi: Cenvat credit cannot be denied to the recipient on the ground that the supplier's clearances did not amount to manufacture, where duty has been paid and the supplier's assessment cannot be reopened at the recipient end.

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