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Issues: Whether Cenvat credit of duty paid by sister units on stock-transferred inputs was admissible to the recipient unit, where the supplier units adopted valuation under Rule 8 of the Central Excise Valuation Rules, 2000 and the Revenue disputed the assessable value at the supplier end.
Analysis: The input goods were transferred from sister units on payment of duty, and the recipient took credit of the duty actually paid on the invoices. The dispute arose because the Revenue alleged that the supplier units had not included profit margin in the cost and had therefore paid duty on an inflated assessable value. The governing principle applied was that, for purposes of Rule 3 of the Cenvat Credit Rules, 2004, credit is admissible of the duty actually paid on the inputs, and the recipient authorities cannot deny credit merely because the supplier's valuation is alleged to be excessive, so long as the duty paid has not been refunded or set aside at the supplier end.
Conclusion: The credit was held admissible, reversal of credit was not warranted, and penalty was not sustainable.
Ratio Decidendi: Cenvat credit cannot be denied to the recipient of inputs when duty has been paid on the invoices by the supplier and that duty has neither been refunded nor successfully challenged at the supplier end, even if the Revenue disputes the supplier's assessable value.
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