Cenvat credit cannot be denied on technical grounds where duty was paid, inputs were used, and no fraud or record lapse is proved.

Cenvat credit on duty-paid inputs used in manufacture cannot be denied on purely technical grounds where no upper time-limit for availment was prescribed and transitional provisions protected accrued credit; delayed filing of bills of entry was therefore not a valid basis for rejection. Credit was also not barred merely because the duty payment arose in settlement proceedings, absent any proved finding of fraud, collusion, wilful misstatement or suppression of facts. An objection of non-maintenance of records likewise failed where statutory records were dispensed with and private or contemporaneous records existed. The denial of Modvat/Cenvat credit and connected penalties was set aside.

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Issues: (i) Whether Cenvat credit could be denied on the ground that the bills of entry were assessed and the credit was taken after a delay. (ii) Whether the credit was barred on the premise that the duty payment arose from fraud, collusion, wilful misstatement or suppression of facts. (iii) Whether denial of credit was justified for alleged non-maintenance of proper records.

Issue (i): Whether Cenvat credit could be denied on the ground that the bills of entry were assessed and the credit was taken after a delay.

Analysis: The inputs had been received and used in manufacture, the duty had ultimately been paid, and the assessed bills of entry were returned only later after the customs dispute was settled. The Tribunal held that the Revenue could not rely on its own refusal to accept the remaining bills of entry or on the timing of the credit when no upper time-limit for taking credit was prescribed in the applicable rules, and the transitional provisions protected accrued credit.

Conclusion: Denial of credit on the ground of delayed availment was not justified and the finding went against the Revenue.

Issue (ii): Whether the credit was barred on the premise that the duty payment arose from fraud, collusion, wilful misstatement or suppression of facts.

Analysis: The Tribunal found no finding by the Settlement Commission or any competent authority establishing a guilty intent. Mere recourse to settlement proceedings did not amount to an admission of guilt, and the facts did not show that clearance from the captive jetty was with intent to evade duty. Since the duty was paid and the goods were used in the manufacture of dutiable final products, the substantive credit could not be denied on that basis.

Conclusion: The allegation of fraud or suppression was not sufficient to bar credit and the finding went in favour of the assessee.

Issue (iii): Whether denial of credit was justified for alleged non-maintenance of proper records.

Analysis: The record showed that statutory records had been dispensed with under the relevant regime and that private records existed. The customs proceedings themselves referred to daily production reports, statements of receipt, consumption and stock, and other records indicating maintenance of relevant data. The Tribunal held that this objection was not supported by evidence and could not sustain denial of credit.

Conclusion: The objection based on alleged non-maintenance of records failed and the finding went in favour of the assessee.

Final Conclusion: The impugned denial of Modvat/Cenvat credit and the connected penalties were set aside, and the appeals succeeded with consequential relief.

Ratio Decidendi: Where duty on inputs has been paid and the inputs are used in manufacture, substantive Cenvat credit cannot be denied on purely technical or procedural grounds, including delayed availment or the Revenue's own refusal to process the relevant documents, absent a proved bar under the credit rules.

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