Cenvat credit on capital goods cannot be denied solely due to doubts about the supplier's manufacturing capacity.

Cenvat credit on capital goods cannot be denied merely on an allegation that the supplier lacked manufacturing infrastructure, where the recipient obtained the goods on duty-paying invoices from a registered supplier. The decisive factor is whether the goods were actually received and whether the recipient was involved in any sham or collusive transaction. In the absence of evidence disproving receipt of goods or showing collusion, the supplier's alleged status as a paper entity is insufficient to dislodge the credit claim. The Tribunal therefore found the credit denial unsustainable and granted consequential relief.

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Issues: Whether Cenvat credit on capital goods could be denied merely because the supplier was alleged to have inadequate manufacturing infrastructure, where the appellant had procured the goods on duty-paying invoices from a registered supplier.

Analysis: The appellant had taken credit on capital goods received under invoices issued by a Central Excise registered supplier. The denial was founded on an allegation that the supplier was only a paper entity and had no manufacturing facility. The decisive consideration was that the credit was availed on duty-paying documents and the supplier's registration and existence in the excise chain were not disputed in a manner sufficient to dislodge the appellant's claim. In such circumstances, and following the cited Tribunal decisions, the mere allegation regarding the supplier's manufacturing capacity was held insufficient to deny credit to the recipient absent contrary evidence showing that the goods were not received or that the appellant had acted in collusion.

Conclusion: The denial of Cenvat credit was not sustainable, and the appellant was entitled to the credit.

Final Conclusion: The impugned order was set aside and the appeal was allowed with consequential relief.

Ratio Decidendi: Cenvat credit cannot be denied to a recipient who has procured capital goods on duty-paying documents from a registered supplier unless the Revenue establishes that the goods were not received or that the recipient was complicit in any sham transaction.

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