CENVAT credit on declared opening stock cannot be denied on assumptions or arithmetical calculations without supporting evidence.

CENVAT credit on inputs lying in stock as on 01.04.2000 could not be denied where the assessee had filed the stock declaration, the department had physically verified the stock and found it correct, and the credit was supported by duty-paying documents. The Revenue's case rested on assumptions drawn from sales tax and VAT returns and on a FIFO-based arithmetical working, but no contemporaneous evidence showed that the declared stock included trader-sourced goods. Statements recorded in investigation indicated separate storage and use of goods from manufacturers and traders. In the absence of contrary evidence, mere computation could not displace the declared stock position or justify denial of credit.

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Issues: Whether CENVAT credit taken on inputs lying in stock as on 01.04.2000 could be denied on the basis that a portion of the goods was allegedly purchased from traders and not directly from manufacturers, and whether the Revenue's reliance on arithmetical calculations without supporting evidence was sufficient to sustain the demand.

Analysis: The appellants had filed the stock declaration on 31.03.2000, the department had physically verified the stock and found it correct, and the credit was taken on the basis of duty-paying documents. The demand was founded on an assumption drawn from sales tax and VAT returns and on a first-in first-out working, but no contemporaneous verification established that the declared stock included trader-sourced inputs. The investigation also recorded statements indicating that materials from manufacturers and traders were stored separately and used separately. In the absence of contrary evidence, mere arithmetical computation could not displace the declared stock position or justify denial of credit.

Conclusion: The denial of CENVAT credit was not sustainable and the issue was decided in favour of the assessee.

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