Cenvat credit cannot be denied for supplier default alone absent proof that the recipient knew of non-payment.

Cenvat credit taken on the basis of cenvatable documents could not be denied merely because the input supplier or service provider had failed to pay duty or service tax, where there was no evidence that the recipient knew of the non-payment when the credit was availed. The supplier's default, without proof of the assessee's awareness or collusion, was insufficient to defeat credit in the hands of the recipient. The credit was therefore treated as validly taken and the assessee succeeded.

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Issues: Whether Cenvat credit could be denied to the assessee merely because the input supplier or service provider had not paid duty or service tax, when there was no evidence that the assessee knew of such non-payment at the time of availing credit.

Analysis: The assessee availed credit on the basis of cenvatable documents. No material was produced to show that, when credit was taken, the assessee was aware that the supplier had not discharged the tax liability. In such circumstances, the default of the supplier could not, by itself, justify denial of credit to the recipient.

Conclusion: The credit was held to be validly taken and the appeal was allowed in favour of the assessee.

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