Cenvat credit on valid duty-paid inputs upheld where bona fide invoices and supporting records showed duty payment.

Cenvat credit was held admissible where inputs were received under valid central excise invoices and the recipient had taken reasonable steps to verify that duty had been paid. The supplier confirmed duty payment, ER-1 returns supported payment for the relevant period, and bank evidence also indicated duty discharge. The contrary objection based on the supplier being a 100% EOU failed because DTA clearance on payment of applicable duty had already been permitted. In a bona fide transaction, the circular relied upon indicated that recovery should ordinarily be pursued against the supplier rather than by denying credit to the consignee.

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Issues: Whether Cenvat credit was admissible when the inputs were received under valid invoices and the supplier's payment of duty was later questioned, and whether the assessee had taken reasonable steps to ensure that appropriate duty had been paid on the inputs.

Analysis: Credit under the Cenvat scheme is available on the basis of prescribed documents, and the recipient is required to take reasonable steps to ensure that the goods covered by those documents bear appropriate duty. The inputs here were supplied under valid central excise invoices, the supplier confirmed duty payment, the supplier's ER-1 returns evidenced duty payment for the relevant period, and the bank certificate also supported payment of CVD. The Commissioner's reliance on the supplier being a 100% EOU was found factually incorrect because permission had already been granted for DTA clearance on payment of applicable duty. The circular relied upon also indicated that, where the transaction is bona fide, recovery should ordinarily be pursued against the supplier rather than denying credit to the consignee.

Conclusion: Cenvat credit was admissible and denial of credit was not justified; the issue was decided in favour of the assessee.

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