Manufacturer can claim CENVAT credit on inputs directly supplied to customers if cleared on duty payment.

The Tribunal ruled in favor of the appellant, allowing them to claim CENVAT credit on inputs directly supplied to customers as long as the inputs were cleared on payment of duty. The decision was based on the precedent set by a previous case and clarified the entitlement of manufacturers to such credit. The impugned order denying the credit was set aside, and the appeal was allowed with any necessary consequential relief.

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Issues: Appeal against denial of CENVAT credit on inputs directly supplied to customers.

Analysis:
1. Issue of CENVAT credit denial: The appellant, a manufacturer of sugar manufacturing equipments, appealed against the denial of CENVAT credit on inputs directly supplied to customers. The Revenue contended that since these inputs were not received in the factory and not used in the final product, the appellant was not entitled to take credit.

2. Judicial Precedent: The Tribunal referred to the case of Ajinkya Enterprises vs. CCE, where it was held that if an assessee pays duty on inputs and clears them "as such" on payment of duty, the duty paid amounts to the reversal of credit taken on those inputs. The Tribunal further affirmed that the issue was no longer res integra based on the Ajinkya Enterprises case, which was upheld by the Hon'ble High Court of Bombay.

3. Decision: Considering the precedent set by Ajinkya Enterprises, the Tribunal ruled in favor of the appellant. It held that the appellant was entitled to take credit on bought-out items that were cleared on payment of duty. Consequently, the impugned order denying CENVAT credit was set aside, and the appeal was allowed with any consequential relief deemed appropriate.

This judgment clarifies the entitlement of manufacturers to claim CENVAT credit on inputs directly supplied to customers, provided the inputs were cleared on payment of duty. The decision reinforces the legal principle established in the Ajinkya Enterprises case and provides guidance on similar issues concerning the availment of credit on bought-out items.

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