Wrongful Cenvat credit on invoices without goods received supports demand, interest, and penalty where shortage was admitted immediately.

Wrongful availment of Cenvat credit based on invoices without receipt of goods was confirmed where stock verification showed shortage, the authorised signatory admitted the lapse, and the credit was reversed with payment on the same day. A later explanation that the goods were available was treated as a delayed afterthought and did not displace the immediate admission or the verification record. On that basis, the demand for credit, interest, and equal penalty was sustained. Because the wrongly availed credit was used to discharge duty on clearances, the clearances were treated as effectively made without payment of duty for penalty purposes, and the penalty under Rule 25 was also upheld.

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Issues: (i) Whether the demand of Cenvat credit, interest, and equal penalty was sustainable on the finding that the inputs were not physically available and credit had been taken on invoices without receipt of goods. (ii) Whether the penalty under Rule 25(1)(a) read with Rule 25(1)(d) of the Central Excise Rules, 2002 was justified on the basis that clearances were made while the credit balance was not genuinely available.

Issue (i): Whether the demand of Cenvat credit, interest, and equal penalty was sustainable on the finding that the inputs were not physically available and credit had been taken on invoices without receipt of goods.

Analysis: The stock shortage was noticed during verification in the presence of the authorised signatory, who signed the stock report and, in his statement under Section 14 of the Central Excise Act, 1944, admitted the shortage and stated that credit had been taken on invoices though no goods had been received. He also agreed to reverse the credit and paid the amount by cheque on the same day. The later letter claiming that the goods were available in the factory was sent after a delay of about sixteen days and was treated as an afterthought. The later assertion that the goods were actually present was found inconsistent with the immediate admission and payment, and the suppliers' confirmations did not displace the finding that the goods were not available at the time of verification.

Conclusion: The demand of Cenvat credit, interest, and equal penalty was upheld and is against the assessee.

Issue (ii): Whether the penalty under Rule 25(1)(a) read with Rule 25(1)(d) of the Central Excise Rules, 2002 was justified on the basis that clearances were made while the credit balance was not genuinely available.

Analysis: Since the credit had been wrongly availed and the duty on the clearances had been discharged through such inadmissible credit, the clearances were treated as having been made without payment of duty for the relevant purpose. In that situation, the contravention attracted penalty under Rule 25, and the quantum imposed was considered appropriate to the nature of the breach.

Conclusion: The penalty under Rule 25(1)(a) read with Rule 25(1)(d) was upheld and is against the assessee.

Final Conclusion: The impugned order was affirmed in full, with all confirmed demands and penalties sustained.

Ratio Decidendi: An immediate admission of shortage and wrongful credit, coupled with delayed retraction or contrary explanation, can justify confirmation of Cenvat credit demand and consequential penalties when the goods were not shown to be available at the time of verification.

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