CENVAT credit denial fails when statutory records and consistent evidence show receipt, processing, and duty-paid clearance of goods.

CENVAT credit denial based on alleged non-receipt and non-processing of grey fabrics could not be sustained where the Revenue relied mainly on a merchant exporter's statement, while the assessee's director consistently stated that the fabrics were received, entered in statutory records, processed, and cleared on payment of duty. The assessee's records supported that version, and no independent corroboration showed the records were false or that the goods were never received. Forged rebate documents of the exporter did not by themselves disprove processing by the assessee. The CESTAT therefore held that the allegation was unproved and set aside the duty demand and penalties.

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Issues: Whether the demand of duty and penalties could be sustained by denying deemed cenvat credit on the allegation that grey fabrics were never received or processed at the appellant's premises.

Analysis: The Revenue's case rested mainly on the statement of a person from the merchant exporter, while the appellant's director consistently stated that the grey fabrics were received, entered in statutory records, processed, and cleared on payment of duty. Those statements were supported by the appellant's records, and no independent corroboration was produced to show that the records were false or that the goods were never received. The fact that the exporter's rebate documents were found forged did not, by itself, establish that the appellant had not processed the goods. The payment of duty from the PLA also supported the appellant's version.

Conclusion: The allegation of non-receipt and non-processing was not proved, and the denial of credit, duty demand, and penalties could not be sustained.

Final Conclusion: The impugned order was set aside and the appellants were granted consequential relief.

Ratio Decidendi: Where the Revenue's allegation is unsupported by independent corroborative evidence and the assessee's statutory records and consistent statements establish receipt, processing, and duty-paid clearance of goods, credit denial and consequential duty and penalty cannot be sustained.

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