Cenvat credit on supplementary invoices cannot be denied absent findings of suppression or intent to evade duty.

Cenvat credit on supplementary invoices could not be denied to a purchaser merely because penalty was imposed on the supplier. The supplier's show cause notice and adjudication order did not record suppression of facts, wilful misstatement, contravention with intent to evade duty, or any other foundational finding required to trigger the credit restriction. Mere penalty under Rule 173Q, without those statutory ingredients, was insufficient to speculate against the purchaser. In the absence of the preconditions for applying Rule 7(b) of the Cenvat Credit Rules, 2002, denial of credit was unsustainable.

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Issues: Whether Cenvat credit on supplementary invoices could be denied to the purchaser of inputs merely because penalty had been imposed on the supplier, when the supplier's show cause notice and adjudication order did not record suppression of facts, wilful misstatement, or intent to evade duty.

Analysis: The supplier's show cause notice and the order passed against it did not contain findings that the supplier had suppressed facts, made wilful misstatement, contravened the Act or the Rules with intent to evade duty, or otherwise attracted the ingredients necessary for invoking the relevant credit restriction. Mere imposition of penalty on the supplier under Rule 173Q of the Central Excise Rules, 1944, without such foundational findings, was insufficient to justify speculation against the purchaser. In the absence of the statutory preconditions, Rule 7(b) of the Cenvat Credit Rules, 2002, could not be applied to deny the credit.

Conclusion: Denial of Cenvat credit was unsustainable and the assessee succeeded.

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