Cenvat credit on alleged bogus invoices requires proof of non-receipt of goods and actual contravention, not suspicion.

Cenvat credit cannot be denied merely on allegations of bogus invoices unless the department establishes, with cogent evidence, that the goods were not received or that the assessee contravened the governing invoice rules. Where the dispute rests on dealer investigation alone, and the record shows invoice particulars, payment by cheque, and supporting documents, the burden is not met unless proper enquiry links the transactions to a non-receipt of goods. The analysis emphasises that penalties also depend on proof of contravention, and cannot stand on suspicion or incomplete investigation.

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Issues: Whether Cenvat credit and consequential penalties could be sustained on the basis of alleged bogus invoices, where the department failed to establish non-receipt of goods or to conduct proper investigation into the disputed transactions.

Analysis: The dispute turned on alleged contravention of the rules governing issuance and use of cenvatable invoices and availment of Cenvat credit. The records showed that the department relied substantially on investigation into the first stage dealers, while only one invoice was specifically disputed in the show cause notice and no effective enquiry was made into the remaining invoices or the actual vehicle numbers used for transportation. The respondent produced invoice details, supported by documentary records and payment by cheque, and the department did not adduce evidence to show that the goods covered by the invoices were not received. In the absence of proof that the respondent had contravened the law, the foundation for denial of credit and imposition of penalties was not made out.

Conclusion: The denial of Cenvat credit and the penalties were not sustainable, and the respondent succeeded.

Ratio Decidendi: Cenvat credit cannot be denied merely on allegations of bogus invoices unless the department establishes, by cogent evidence, that the goods were not received or that the assessee contravened the governing rules.

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