Cenvat credit remains admissible where duty was paid and documented, even if the supplier's manufacture is later questioned.

Cenvat credit is available to a recipient where the supplier has paid duty under an adjudication order upheld in appeal, and the Department does not dispute that payment. In that situation, compliance with the requirement to take reasonable steps under the Cenvat Credit Rules is sufficient, and credit cannot be denied merely because the supplier's iron ore processing was alleged not to amount to manufacture or because the duty was characterised as a deposit. On that basis, the demand, interest, and penalties were unsustainable.

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Issues: Whether Cenvat credit could be denied to the recipient merely because the supplier's process on iron ore was alleged not to amount to manufacture, and whether the duty paid by the supplier could be treated as a mere deposit so as to disentitle credit.

Analysis: The supplier had paid duty pursuant to an adjudication order that had been upheld in appeal, and the Department did not dispute that position. On that footing, the recipient's availment of Cenvat credit was examined under Rule 3(1) and Rule 3(4) of the Cenvat Credit Rules, 2002, and the corresponding requirements of Rule 7(2) of the Cenvat Credit Rules, 2002 and Rule 9(3) of the Cenvat Credit Rules, 2004. The record showed compliance with the requirement to take reasonable steps to ensure that duty indicated in the accompanying documents had been paid. In such circumstances, the credit could not be denied on the theory that the supplier's duty payment was unauthorised or only a deposit.

Conclusion: Cenvat credit was admissible to the assessee and the demand, interest, and penalties were unsustainable.

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