Procedural lapse in export bond documentation cannot defeat otherwise admissible Cenvat credit or sustain penalty and interest.

Cenvat credit cannot be denied merely because export documents and bond records initially reflected 4% duty instead of 16% under Notification No. 3/2001, where export of goods and substantive eligibility to credit on inputs or capital goods were otherwise undisputed. The procedural lapse in following the export bond procedure did not defeat the underlying entitlement to credit. Once the credit itself was admissible on merits, the associated penalty and interest could not survive independently. The denial of Cenvat credit was therefore not sustainable, and the assessee succeeded on the substantive credit issue.

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Issues: Whether Cenvat credit could be denied merely because the assessee had initially followed the export bond procedure at 4% instead of 16%, and whether the penalty and interest could survive when the underlying credit was otherwise admissible.

Analysis: The assessee had exported the goods and the department did not dispute the substantive eligibility to Cenvat credit on the inputs or capital goods. The only objection was that the export documents and bond account had initially reflected 4% duty under Notification No. 3/2001 instead of 16%. That defect was treated as a procedural lapse, because the assessee could have adopted the correct procedure from the outset and still retained the same substantive entitlement to credit. Once the substantive right to credit was found to exist, the objection as to penalty and interest could not stand independently.

Conclusion: The denial of Cenvat credit was not sustainable. The appeal was rejected and the assessee succeeded on the substantive credit issue.

Ratio Decidendi: A procedural mistake in the manner of availing export-related credit cannot defeat a substantive entitlement to Cenvat credit where export and eligibility are otherwise undisputed.

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