Cenvat credit through a registered dealer remains admissible when receipt, documents, and bona fide transaction are established.

Cenvat credit on inputs purchased through a registered first stage dealer was treated as admissible where the recipient established receipt of goods under duty-paying documents, payment through banking channels, and corresponding statutory entries. The analysis accepted that a bona fide buyer is not required to trace the dealer's upstream records beyond the documents supporting its own transaction. Investigation into the original manufacturer, by itself, was insufficient to deny credit to the recipient when actual receipt was proved. As credit was allowed, penalties based on alleged fraudulent availment also did not survive on the facts accepted by the majority.

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Issues: Whether Cenvat credit taken on inputs received from the first stage dealer and the manufacturer-supplier could be denied, and whether the related penalties were sustainable.

Analysis: The decisive consideration was whether the appellant had received the goods under duty-paying documents and had acted with reasonable diligence in the transactions. The record showed receipt of goods, payment through banking channels, and entries in the statutory records. The reasoning accepted that an assessee purchasing through a registered first stage dealer is not required to go behind the dealer's records where the transaction is otherwise bona fide and supported by documents. The upstream investigation against the original manufacturer was held insufficient, by itself, to deny credit to the recipient when the recipient's own receipt of goods was established. Since denial of credit failed, the connected penalties based on alleged fraudulent availment also could not survive against the appellant on the facts accepted by the majority.

Conclusion: Cenvat credit was held allowable and the consequential penalties were not sustained, resulting in relief to the appellant.

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