Cenvat credit on ISD invoices after refund rejection was upheld, and limitation could not be raised outside the notice.

Cenvat credit taken on ISD invoices after rejection of the refund claim was admissible because the assessee had already pursued the refund route, and the later credit availment was not sustainable to be treated as suo motu credit. The limitation objection was also rejected since it was not raised in the show cause notice, and in any event no prescribed time bar applied to the relevant ISD invoices before the later amendment introducing a one-year restriction. The denial on both grounds was set aside.

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Issues: Whether Cenvat credit taken on the strength of ISD invoices after rejection of the refund claim was admissible, and whether the credit could be denied on the ground of limitation not alleged in the show cause notice.

Analysis: The credit was taken for the first time after the refund claim had been rejected and the appeal against refund had also been disposed of, so the allegation of suo motu credit was not sustainable. The assessee was entitled to choose between pursuing refund and availing credit, and once the refund route failed there was nothing left to survive against the credit availment. The limitation objection also could not be sustained because it was not part of the show cause notice. In any event, credit on ISD invoices carried no such prescribed time bar, and the one-year restriction could not be applied to invoices issued before the amendment introducing that limit.

Conclusion: The Cenvat credit was held to be admissible, and the denial on both the suo motu credit and limitation grounds was rejected.

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