Cenvat credit and unregistered clearances: duty-paid inputs support credit, while unregistered manufacture justifies confiscation and penalty.

Cenvat credit could not be denied merely because the assessee lacked Central Excise registration where duty-paid inputs and their use in manufacture were established, so the substantive credit benefit was sustained despite the procedural lapse. Unregistered manufacture and clearance of excisable goods without duty payment justified confiscation of the goods and imposition of penalty, and the penalty quantum was modified upward in light of the admitted remaining duty liability after credit.

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Issues: (i) whether Cenvat credit was allowable despite absence of Central Excise registration; (ii) whether confiscation of goods and penalty were justified for unregistered manufacture and clearance of excisable goods.

Issue (i): whether Cenvat credit was allowable despite absence of Central Excise registration

Analysis: The inputs were supported by duty-paying documents and the assessee had claimed the credit when the officers visited the factory. The denial of credit solely on the ground of non-registration was not accepted, as the credit scheme is intended to allow credit of duty-paid inputs used in manufacture and minor procedural lapses cannot defeat the substantive benefit when duty payment on inputs is established.

Conclusion: Cenvat credit was allowable to the assessee, and the denial of credit merely for want of registration was not sustained.

Issue (ii): whether confiscation of goods and penalty were justified for unregistered manufacture and clearance of excisable goods

Analysis: The assessee had manufactured excisable goods without registration and had cleared goods without payment of duty. On these facts, the seized yarn was liable to confiscation and the imposition of penalty was warranted. At the same time, the quantum of penalty was assessed in the light of the admitted duty liability remaining after credit, leading to an enhancement over the reduced amount fixed by the appellate authority.

Conclusion: Confiscation was justified, and penalty was sustainable though modified upward.

Final Conclusion: The appeal succeeded in part in relation to penalty, while the assessee's challenge to confiscation failed and the allowance of Cenvat credit was sustained.

Ratio Decidendi: Cenvat credit cannot be denied merely because the assessee lacked registration when duty-paid inputs and their use in manufacture are established, but unregistered manufacture and clearance of excisable goods justify confiscation and penalty.

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