Cenvat credit eligibility on stock-transferred inputs confirmed where the inputs were used in manufacture

Under the relevant Cenvat credit regime, purchase was not a mandatory prerequisite for credit on inputs, and the manner in which inputs were acquired did not by itself defeat eligibility where they were used in manufacture. The substitution of "procured" for "purchase" was treated as clarificatory of legislative intent, and the binding authority on credit eligibility supported that view. On that basis, credit could not be denied merely because the inputs were received by stock transfer rather than by purchase, and the revenue challenge failed.

---

---

Issues: Whether Cenvat credit could be denied on inputs received on stock transfer on the ground that purchase and maintenance of inventory records were mandatory prerequisites prior to 28 February 2003.

Analysis: The appeal turned on the interpretation of the credit rules governing the relevant period. The earlier Tribunal decision relied upon held that the definition of input and the conditions for availing credit did not make purchase a compulsory condition, and that the mode of acquisition of inputs was immaterial so long as the inputs were used in manufacture. The substitution of the word "procured" for "purchase" by notification was treated as clarificatory of the legislative intent. The Court also noted that the Tribunal had followed a binding line of authority, including the Supreme Court's view on the governing principle for credit eligibility, and found no distinguishing feature in the revenue's challenge.

Conclusion: Cenvat credit could not be denied merely because the inputs were received by stock transfer rather than by purchase, and the revenue's challenge failed.

Ratio Decidendi: For the relevant credit regime, purchase was not a sine qua non for availing Cenvat credit on inputs, and the mode of acquisition of inputs did not by itself disentitle the assessee where the inputs were used in manufacture.

---