Cenvat credit needs documentary corroboration, while unaccounted finished goods in RG-1 remain liable to confiscation.

Documentary evidence of receipt and movement of inputs can prevail over a bare statement when Cenvat credit is disputed; statutory records showing receipt, job-work movement, return of processed goods, and cheque payment were treated as sufficient, and the credit demand with interest and equal penalty failed. Finished excisable goods found in excess of RG-1 and not entered in statutory stock records were treated as liable to confiscation even without proof of mens rea; the confiscation was sustained, but the redemption fine was reduced as excessive. The note also restates that uncorroborated oral assertions are insufficient to displace contemporaneous records.

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Issues: (i) Whether Cenvat credit availed on copper foils was admissible where the department relied principally on the Director's statement and alleged non-receipt of inputs; (ii) whether finished copper pipes found in excess of RG-1 balance were liable to confiscation and redemption fine.

Issue (i): Whether Cenvat credit availed on copper foils was admissible where the department relied principally on the Director's statement and alleged non-receipt of inputs.

Analysis: The majority held that the denial of credit rested mainly on the Director's statement, while the assessee produced statutory records showing receipt of inputs, dispatch to job workers, return of processed goods, and payment by cheque. No independent inquiry was made with suppliers, transporters, or job workers, and no contrary evidence established non-receipt of inputs. On these facts, the oral statement was held insufficient to displace the documentary record.

Conclusion: The credit was held admissible and the demand of duty, interest, and equal penalty under Section 11AC failed.

Issue (ii): Whether finished copper pipes found in excess of RG-1 balance were liable to confiscation and redemption fine.

Analysis: The majority held that the goods were finished, ready for dispatch, and admittedly not entered in RG-1. In view of the applicable confiscation provision, non-accountal of finished excisable goods rendered them liable to confiscation, irrespective of mens rea. The redemption fine, however, was reduced as the original amount was considered excessive.

Conclusion: The confiscation was upheld and the redemption fine was reduced to Rs. 25,000/-.

Final Conclusion: The demand and penalties relating to the alleged irregular Cenvat credit were set aside, but confiscation of the excess finished goods was sustained with a reduced redemption fine.

Ratio Decidendi: Where statutory documentary evidence supports receipt and movement of inputs, a bare admission or statement, without independent corroboration, is insufficient to deny Cenvat credit; separately, finished excisable goods not accounted for in statutory stock records are liable to confiscation under the confiscation rules.

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