Cenvat credit and secondary evidence rules allowed credit on capital goods and Xerox invoices, but raw material shortage demand survived.

Cenvat credit on capital goods was held allowable even though factory registration was obtained later, because the credit otherwise accrued in the year of receipt and was not lost by subsequent registration. Demand based on shortage of raw material found during physical verification was sustained, as the assessee did not successfully rebut the verification findings. Cenvat credit was also held not to be deniable merely because invoices were produced as Xerox copies, since secondary evidence was admissible where originals were not produced and the assessee was not given an opportunity to file them. The appeal succeeded only on the credit-related issues and failed on the shortage demand.

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Issues: (i) Whether 50% Cenvat credit on capital goods could be availed before registration of the factory; (ii) Whether demand arising from shortage of raw material found on physical verification was liable to be sustained; (iii) Whether Cenvat credit could be denied merely because the invoices produced were Xerox copies and not originals.

Issue (i): Whether 50% Cenvat credit on capital goods could be availed before registration of the factory.

Analysis: The capital goods had been received in the relevant year, while registration was obtained later. The dispute was governed by Rule 4(2) of the Cenvat Credit Rules, 2004. The Tribunal followed the view already upheld by the jurisdictional High Court that the balance 50% credit is not lost merely because registration was obtained subsequently, so long as the credit otherwise accrues in the year of receipt of the capital goods.

Conclusion: The issue was decided in favour of the assessee and the denial of 50% credit prior to registration was set aside.

Issue (ii): Whether demand arising from shortage of raw material found on physical verification was liable to be sustained.

Analysis: The shortage was noticed during physical verification carried out in the presence of the assessee. On that record, the assessee could not successfully dispute the verification findings at the appellate stage. No sufficient ground was made out to interfere with the finding of shortage.

Conclusion: The issue was decided against the assessee and the demand on account of shortage was sustained.

Issue (iii): Whether Cenvat credit could be denied merely because the invoices produced were Xerox copies and not originals.

Analysis: The credit was claimed on Xerox copies of invoices. The authorities did not afford an opportunity to produce the originals. In such circumstances, secondary evidence was held to be admissible under the proviso to Section 63 of the Indian Evidence Act, 1872. The Tribunal also relied on its earlier view that credit cannot be denied solely for want of originals where secondary evidence is otherwise permissible.

Conclusion: The issue was decided in favour of the assessee and the denial of credit on the basis of Xerox copies was set aside.

Final Conclusion: The appeal succeeded only to the extent of the credit claims relating to pre-registration capital goods and invoices produced as secondary evidence, while the demand based on raw material shortage was maintained.

Ratio Decidendi: Cenvat credit cannot be denied where entitlement otherwise exists merely because registration was obtained later or because credit is supported by admissible secondary evidence in place of originals, but a verified shortage of raw material may be sustained if not effectively rebutted.

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