Cenvat credit on duty-paid inputs cannot be denied because of a later dispute over the supplier's manufacturing process.

Cenvat credit remained admissible to the recipient of duty-paid inputs where the supplier's manufacturing process or classification was later questioned in separate proceedings, especially when the supplier was not a party. The recipient was entitled to rely on the invoices showing the goods as duty-paid under the relevant chapter headings and could not alter the supplier's classification. A circular dated 2-3-2005 was treated as inapplicable because the goods appeared to have been manufactured before that date. Credit was therefore allowed and the revenue challenge failed.

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Issues: Whether Cenvat credit was admissible to the recipient of inputs where the supplier's process was alleged not to amount to manufacture, and the supplier was not a party to the proceedings.

Analysis: The inputs were shown in the invoices as duty-paid goods falling under the relevant chapter headings. The recipient could not alter the classification under which the supplier had cleared the goods. The circular dated 2-3-2005 was treated as inapplicable because the goods appeared to have been manufactured prior to that date. The dispute was covered by the principle that a buyer of duty-paid goods cannot be denied credit merely because the supplier's classification or treatment of the process is questioned in separate proceedings.

Conclusion: Cenvat credit was held admissible, and the revenue's challenge failed.

Ratio Decidendi: Where duty has been paid on inputs cleared by the supplier, the recipient is entitled to credit and cannot be denied such credit on the basis of a later dispute about the supplier's manufacturing process or classification, particularly when the supplier is not a party to the proceedings.

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