In the case of M/s Kay Kay Industries vs. CCE, Jalandhar [CIVIL APPEAL No. 7031 of 2009 (SC)], the assessee had taken Cenvat credit on basis of proper invoices issued by supplier. It was found that supplier had not paid excise duty collected by him, to Government. Therefore, Department sought to deny Cenvat credit to assessee (user-manufacturer). It was held that when there is a prescribed procedure and that has been duly followed by the manufacturer of final products, we do not perceive any justifiable reason to hold that the assessee-appellant had not taken reasonable care as prescribed in the notification. Due care and caution were taken by the respondent. It is not stated what further care and caution could have been taken. The proviso postulates and requires “reasonable care” and not verification from the department whether the duty stands paid by the manufacturer-seller. When all the conditions precedent has been satisfied, to require the assessee to find out from the departmental authorities about the payment of excise duty on the inputs used in the final product which have been made allowable by the notification would be travelling beyond the notification, and in a way, transgressing the same. This would be practically impossible and would lead to transactions getting delayed. Thus, Cenvat credit cannot be denied to the recipient.

To read the complete judgment 2016 Taxo.online 12