Cenvat credit on duty-paid inputs cannot be denied merely because the supplier's process is disputed as non-manufacture.

Cenvat credit on bright bars used as inputs was admissible because the goods were duty-paid, received under valid documents, and used in manufacture of the final product. The department's objection that the supplier's process did not amount to manufacture was immaterial once duty payment and input use were established. The conflicting departmental treatment of bright bars further weakened the denial. The demand and penalty were set aside and consequential relief followed.

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Issues: Whether Cenvat credit was admissible on bright bars used as inputs when duty had been paid on those goods, though the department contended that no manufacture was involved in their production.

Analysis: The credit could not be denied merely because the department considered the bright bars to be non-excisable at the supplier's end. The record showed that duty had been paid on the bright bars, they were received under valid documents, and they were used in the manufacture of the final product. Once duty payment and use as inputs were established, the question whether the supplier's process amounted to manufacture was immaterial for denying credit. The departmental position was also weakened by its own conflicting treatment of bright bars through trade notices and protective action.

Conclusion: Cenvat credit on the bright bars was admissible and the denial of credit was unsustainable.

Final Conclusion: The demand and penalty were set aside, and the appeal succeeded with consequential relief.

Ratio Decidendi: Where duty-paid goods are received under valid documents and used as inputs in the manufacture of final products, credit cannot be denied merely because the supplier's activity is disputed as not amounting to manufacture.

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