CENVAT credit and limitation: bona fide recipient cannot lose credit for supplier's invoice error, and demand was time-barred.

CENVAT credit could not be denied to a bona fide recipient of inputs merely because the supplier's invoice contained an incorrect declaration about duty payment; the Revenue's remedy lay against the supplier, and the credit denial was not sustainable. The demand was also held time-barred because the credit entry was reflected in the recipient's records and the invoices disclosed duty particulars, so there was no concealment or basis to attribute knowledge of the supplier's non-payment to the recipient. The impugned order was set aside and consequential relief followed.

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Issues: (i) Whether CENVAT credit could be denied to the recipient of inputs merely because the supplier's invoices contained a wrong declaration about duty payment; (ii) Whether the demand was barred by limitation.

Issue (i): Whether CENVAT credit could be denied to the recipient of inputs merely because the supplier's invoices contained a wrong declaration about duty payment.

Analysis: The inputs were received under invoices showing duty particulars, and the credit was taken on the basis of the supplier's declaration. The legal question was whether any misstatement at the supplier's end could be visited upon the recipient by denying credit, or whether the Revenue's remedy lay against the supplier. The issue was treated as settled by the Board circular and Tribunal decisions holding that a recipient cannot be denied credit in such circumstances.

Conclusion: The denial of CENVAT credit to the appellant was not sustainable.

Issue (ii): Whether the demand was barred by limitation.

Analysis: The credit entry was duly reflected in the appellant's records, and the invoices themselves disclosed duty payment particulars. In such circumstances, the recipient could not be expected to know that the supplier had not actually discharged the duty liability. On those facts, the extended demand was held to be time-barred.

Conclusion: The demand was barred by limitation.

Final Conclusion: The impugned order was set aside and the appeal succeeded with consequential relief.

Ratio Decidendi: Credit cannot be denied to a bona fide recipient of duty-paid inputs merely because the supplier made a declaration in the invoice, and where the recipient reflects the credit in its records without concealment, limitation may defeat the demand.

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