Input tax credit on inter-unit transfers cannot be denied where duty was paid on provisional value and later finalised under CAS-4.

Input tax credit on inter-unit transfers was held not to be deniable merely because the supplying units adopted a higher provisional assessable value and paid duty accordingly. The goods were cleared on provisional assessment to reflect possible input-cost fluctuation, the assessments were later finalised under CAS-4 norms, and no refund was claimed by the suppliers. In the absence of fraud, manipulation, or any revised assessment reducing the duty already paid, the duty paid by the supplying units remained the duty available for credit. The exercise was treated as revenue neutral, and the recipient unit's credit was allowed.

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Issues: Whether credit taken by the recipient unit on goods transferred inter-unit was liable to be denied on the ground that the supplying units had adopted a higher provisional assessable value and paid excess duty.

Analysis: The goods cleared from the supplying units were assessed provisionally, and the higher value was adopted to account for possible fluctuation in input costs. The duty was actually paid on that basis, the assessments were later finalised under CAS-4 norms, and no refund was claimed by the supplying units. The record disclosed no fraud, manipulation, or revision of assessment warranting reduction of credit. On these facts, the duty paid by the supplying units was the duty available for credit, and the overall exercise was revenue neutral.

Conclusion: The credit could not be denied to the recipient unit and the issue is decided in favour of the assessee.

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