Bona fide recipient credit protection applies when goods are received and used, absent proof of collusion in supplier fraud.

CESTAT Mumbai held that Cenvat credit cannot be denied to a bona fide recipient merely because the supplier fraudulently availed excess credit, where receipt and use of the goods were undisputed and there was no evidence of the recipient's knowledge, collusion, or other infirmity affecting admissibility. Rule 9(5) of the Cenvat Credit Rules, 2004 may place a burden on admissibility, but denial depends on the surrounding facts and the buyer's complicity. Authorities relied on by the Revenue were distinguished because they involved patent invoice defects, fictitious firms, or an interim remand order. The appeal was allowed.

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Issues: Whether Cenvat credit could be denied to the recipient of goods on the ground that the supplier had fraudulently availed excess credit, when receipt and use of goods were not disputed and there was no evidence that the recipient knew of the supplier's default.

Analysis: The condition relied upon in Rule 9(5) of the Cenvat Credit Rules, 2004 places the burden regarding admissibility of credit, but denial of credit to the buyer depends on the surrounding facts and the buyer's knowledge or complicity. The receipt of goods and their use in the recipient's business was not challenged. There was no evidence that the recipient knew that the supplier had wrongly availed Cenvat credit. The situations in the decisions relied upon by the Revenue were distinguishable because they involved patent invoice defects, fictitious firms, or an interim remand order.

Conclusion: Cenvat credit could not be denied to the recipient, and the appeal was allowed.

Ratio Decidendi: Credit cannot be denied to a bona fide recipient of goods merely because the supplier committed a fraud, unless there is evidence of the recipient's knowledge, collusion, or other infirmity affecting admissibility of the credit.

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