CENVAT credit cannot be denied for mere non-compliance with Input Service Distributor procedure where substantive entitlement is established.

CENVAT credit could not be denied merely because invoices were issued in the name of the head office and the Input Service Distributor procedure was not followed, where original documents supported the claim and receipt and utilisation of input services in the factory were undisputed. The objection went only to the routing of credit, and that procedural lapse did not defeat substantive entitlement. The demand, interest, and penalty were therefore not sustainable.

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Issues: Whether CENVAT credit could be denied merely because the invoices were issued in the name of the head office and the Input Service Distributor procedure was not followed.

Analysis: The credit was supported by original documents and there was no dispute regarding receipt and utilisation of the input services within the factory. The objection was confined to the manner in which the credit was routed, namely the absence of ISD compliance. A procedural lapse of this nature does not justify denial of credit where the substantive entitlement is otherwise established. The later acceptance of the Gujarat High Court view by the Board also supported this position.

Conclusion: CENVAT credit could not be denied on the ground of non-following of the ISD procedure, and the demand, interest, and penalty were not sustainable.

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