Cenvat credit and penalty requirements: original invoice evidence and missing culpable intent made the denial and composite penalty unsustainable.

Cenvat credit cannot be denied where the original invoice is produced and statutory records corroborate that the credit was availed only once. On the facts, the record rebutted the allegation of a duplicate or wrongful availment, so the credit was restored. Penalty under Rule 57AH requires proof of fraud, wilful misstatement, collusion, suppression of facts, or intentional contravention to evade duty. As those ingredients were not established and the composite penalty was imposed without proper application of mind, the penalty was set aside.

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Issues: (i) Whether denial of Cenvat credit of Rs. 19,520/- on the ground that it was availed on a xerox copy of invoice and alleged to have been taken twice was sustainable; (ii) Whether the composite penalty imposed under the Central Excise Rules was sustainable.

Issue (i): Whether denial of Cenvat credit of Rs. 19,520/- on the ground that it was availed on a xerox copy of invoice and alleged to have been taken twice was sustainable.

Analysis: The original invoice was produced and its particulars tallied with the xerox copy relied upon by the lower authorities. The statutory records also showed that the credit was taken on 12-1-2001 and not in November, 2000. The factual basis for treating the credit as wrongly availed twice was therefore rebutted by the documentary record.

Conclusion: The denial of Cenvat credit of Rs. 19,520/- was unsustainable and the assessee succeeded on this issue.

Issue (ii): Whether the composite penalty imposed under the Central Excise Rules was sustainable.

Analysis: Penalty had been proposed and imposed under a combination of penal provisions, but the ingredients required for penalty under Rule 57AH, namely fraud, wilful misstatement, collusion, suppression of facts or contravention with intent to evade duty, were not established in the notice or in the orders. Rule 57AH was also not to be read with Rule 173Q in the manner adopted by the lower authorities, and the composite penalty was imposed without proper application of mind.

Conclusion: The entire penalty was unsustainable and was set aside in favour of the assessee.

Final Conclusion: The assessee was entitled to restoration of the disputed Cenvat credit and complete deletion of the penalty.

Ratio Decidendi: Cenvat credit cannot be denied when the original invoice and statutory records establish lawful availing of credit, and penalty under Rule 57AH requires proof of the specified culpable ingredients; a composite penalty imposed without satisfying those ingredients is unsustainable.

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