Cenvat credit denial fails where supplier duty payment is not tainted by penalty and invoice objection loses force.

Cenvat credit cannot be denied merely because an invoice is questioned under Rule 7(1)(b) if the supplier's duty payment is not treated as tainted by penalty. The Tribunal noted that the earlier finding in the supplier's matter was that the duty had been paid on its own and the penalty had been set aside. Once that basis was removed, the ground for rejecting the recipient's credit disappeared. The credit denial was therefore unsustainable, and the appellant was entitled to the credit.

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Issues: Whether credit could be denied on the ground that the invoice was not an eligible document under Rule 7(1)(b) of the Cenvat Credit Rules, when the duty paid by the supplier was not held to be tainted by penalty.

Analysis: The appeal turned on the validity of the credit denial linked to the character of the supplier's duty payment. The Tribunal noted that the earlier decision concerning the supplier had found the duty payment to be made on its own and that the penalty had been set aside. Once the supplier's payment was no longer treated as tainted by penalty, the foundation for rejecting the appellant's credit under Rule 7(1)(b) disappeared.

Conclusion: The denial of Cenvat credit could not be sustained and the appellant was entitled to the credit.

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