CENVAT Credit on Duty-Paid Inputs: Optional procurement procedure under Notification No. 44/2001-CE(NT) did not bar credit.

CENVAT credit was held admissible where inputs for export manufacture were procured under an advance licence invalidation procedure but the supplier paid duty instead of clearing them under Notification No. 44/2001-CE(NT). The Tribunal treated the notification as an optional duty-free procurement route, and held that non-compliance with that procedure does not bar receipt of duty-paid inputs. Once duty was actually paid, credit could not be denied, and the recipient could not question the supplier's assessment. The denial of credit was set aside because the Revenue suffered no loss where credit was taken only on duty actually paid.

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Issues: Whether CENVAT credit is admissible when inputs are procured for export manufacture under an advance licence invalidation procedure and duty is paid by the supplier instead of clearances being made under Notification No. 44/2001-CE(NT).

Analysis: The dispute turned on the nature of Notification No. 44/2001-CE(NT) and the connected rules. The Tribunal followed its earlier view and the Mumbai Bench decision that the notification is only an optional procedure for duty-free procurement of inputs. It held that if the conditions of that procedure are not fulfilled, the inputs may be received on payment of duty. Once duty has been paid on the inputs, CENVAT credit is admissible, and the duty assessment at the supplier's end cannot be questioned at the recipient's end. The Tribunal also noted that there was no loss to the Revenue because credit was being taken only of duty actually paid.

Conclusion: CENVAT credit was held admissible and the denial of credit was set aside in favour of the assessee.

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