Cenvat credit on duty-paid capital goods survives supplier-manufacture allegations when invoices are valid and duty is paid.

Cenvat credit on capital goods cannot be denied merely because the supplier is alleged not to have manufactured the goods, where the assessee received the machinery under valid duty-paid central excise invoices and the duty shown in those documents had been paid. Rule 7(1) of the Cenvat Credit Rules, 2002 permits credit on the basis of duty-paying documents issued by a manufacturer, and no finding showed that the assessee claimed credit beyond the duty actually reflected in the invoices. On that factual basis, the denial of credit was not sustainable, and the assessee was entitled to avail the credit.

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Issues: Whether Cenvat credit on capital goods could be denied merely because the supplier was alleged not to have manufactured the goods, when the goods were received by the assessee under duty-paid central excise invoices and the duty shown in the documents had been paid.

Analysis: The claim for credit was examined in light of Rule 7(1) of the Cenvat Credit Rules, 2002, which permits credit on the basis of duty-paying documents issued by a manufacturer. The factual position accepted was that the machinery reached the assessee's factory, the invoices were issued by the supplier, and the duty reflected in those documents had been discharged. There was no finding that the assessee had taken credit beyond the duty actually shown as paid in the documents. In these circumstances, the basis for denying credit was not sustainable.

Conclusion: The assessee was entitled to avail Cenvat credit on the duty-paid capital goods, and the credit could not be denied.

Ratio Decidendi: Where capital goods are received under valid duty-paying invoices and the duty reflected in those documents has been paid, Cenvat credit cannot be denied merely on an allegation regarding the supplier's manufacturing activity, absent proof that the assessee took credit beyond the duty actually paid.

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