Cenvat credit taken on inputs cannot be denied merely because original manufacturer of inputs is not traceable

In the instant case, Kirtida Silk Mills (the Appellant) availed Cenvat credit of duty paid on inputs, which was denied by the Department and the proceedings were initiated for recovery of Cenvat credit wrongly taken. The Department invoked extended period of limitation to deny Cenvat credit taken by the Appellant on the ground that original manufacturer of the inputs could not be traced.

Being aggrieved, the Appellant preferred an appeal before the Hon’ble Tribunal, wherein the Hon’ble Tribunal relying upon its earlier order dated January 24, 2011, upheld denial of Cenvat credit. The Appellant argued that order January 24, 2011of the Hon’ble Tribunal was reversed in Prayagraj Dyeing & Printing Mills (P.) Ltd Vs. Union of India [(2013) 30 taxmann.com 139/38 STT 525 (Guj.)](Prayagraj case)holding that “if document based on which credit is taken was issued even by practicing fraud, a holder in due course for valuable consideration unless shown to be a party to a fraud, cannot be proceeded against by invoking larger period of limitation”.

Being aggrieved, the Appellant preferred an appeal before the Hon’ble High Court of Gujarat.

The Hon’ble High Court of Gujarat also relied upon the decision in the Prayagraj case and held Cenvat credit cannot be denied merely because original manufacturer of inputs is not traceable.