Genuineness of supplier verification governs Cenvat credit waiver where invoices are found fake

Cenvat credit taken on invoices later found to be fake was disallowed because the assessee had to ensure the genuineness of the supplier and take reasonable steps to verify that the inputs were duty-paid goods under Rule 7(2) of the Cenvat Credit Rules, 2004. The record showed no credible effort to establish the suppliers' identity and no proof of financial hardship to support a complete waiver of pre-deposit. The appellants were therefore denied full waiver and were directed to deposit 20% of the duty, with the balance duty and entire penalty waived subject to compliance.

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Issues: Whether the appellants were entitled to unconditional waiver of pre-deposit of duty and penalty in a case involving Cenvat credit taken on invoices found to be fake or fictitious.

Analysis: The credit had been disallowed on the basis that the invoices were subsequently found to be fake and the suppliers bogus. Under Rule 7(2) of the Cenvat Credit Rules, 2004, the credit availing assessee is required to ensure the genuineness of the supplier and to take reasonable steps to satisfy itself that the inputs are duty paid goods. The record also showed no credible attempt to establish the identity of the suppliers and no plea or proof of financial hardship was made to justify complete waiver.

Conclusion: The appellants were not entitled to full waiver of pre-deposit; they were directed to deposit 20% of the duty amount, with waiver of the balance duty and entire penalty subject to compliance.

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