Penalty and credit denial fail where invoice manipulation is unproven and receipt of goods is not disproved.

Penalty and denial of credit were found unsustainable where the Department failed to prove that the invoices had been issued to another party or that the appellants had not received the yarn covered by those invoices. The record did not contain the office copies of the disputed invoices, nor any investigation or verification identifying the actual recipient. In the absence of evidence establishing wrongful availment of credit merely on the basis of alleged invoice manipulation, the adverse action could not be sustained and consequential relief followed.

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Issues: Whether the penalty and denial of credit were sustainable when the Department did not establish that the invoices were issued to another party or that the appellants had not received the yarn covered by those invoices.

Analysis: The available record did not include the office copies of the invoices said to have been issued to some other party, nor was there any investigation or verification identifying the true recipient of those invoices. In the absence of evidence showing that the appellants had not actually received the yarn covered by the invoices on the basis of which credit was taken, the Department failed to make out a case for penalty. The record also did not establish that the credit had been wrongly availed merely on the basis of the alleged manipulation in the invoices.

Conclusion: The penalty and the adverse action against the appellants were unsustainable, and the appeals were allowed with consequential relief.

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