Cenvat credit on duty-paid inputs cannot be denied unless the supplier's assessment is first disturbed in law.

Cenvat credit could not be denied merely because the supplier's duty payment was alleged to be not legally payable, where the goods were received duty paid and the supplier's assessment had not been challenged or disturbed. The Tribunal applied the settled principle that a recipient is entitled to credit on actually duty-paid inputs unless the supplier's duty liability is first set aside in accordance with law. On the facts, the goods were also prima facie not exempted, which supported admissibility of credit. The denial of Cenvat credit was therefore unsustainable and the assessee was entitled to the credit.

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Issues: Whether Cenvat credit on goods should be denied merely because the supplier's payment of duty was alleged to be not legally payable, when that duty payment had not been questioned or challenged at the supplier's end.

Analysis: The dispute turned on the settled principle that credit is available where duty has been actually paid on inputs and the supplier's assessment has attained finality. The Tribunal noted that the goods were received duty paid and that there was no record of any challenge by the supplier's jurisdictional officers to the duty paid at the supplier stage. It followed the line of authority holding that the recipient cannot be denied credit on the premise that the supplier ought not to have paid duty, unless the supplier's assessment is first disturbed according to law. The Tribunal also observed that, on the facts, the goods were prima facie not exempted, which reinforced the assessee's case.

Conclusion: Denial of Cenvat credit was not sustainable and the credit was admissible to the assessee.

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