CENVAT credit and clandestine scrap removal: minor invoice discrepancies do not defeat credit, but equal penalty follows duty evasion.

Minor discrepancies between invoices and challans do not by themselves defeat CENVAT credit where receipt of duty-paid inputs in the factory and their use in manufacture are otherwise established. The text also notes that credit was denied for one disputed tranche because the supporting invoices were not produced and no contrary evidence was filed. Separately, scrap cleared without payment of duty was treated as clandestine removal, supporting the duty demand and consequential penalty. The penalty was linked to the duty liability, with statutory reduction available on timely compliance.

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Issues: (i) Whether CENVAT credit was admissible where invoices and challans contained minor discrepancies but receipt of inputs was not in dispute, including the disputed credit of Rs. 73,905/-. (ii) Whether the duty demand on scrap cleared without payment of duty and the consequential penalty were sustainable.

Issue (i): Whether CENVAT credit was admissible where invoices and challans contained minor discrepancies but receipt of inputs was not in dispute, including the disputed credit of Rs. 73,905/-.

Analysis: The decisive test for availment of credit was receipt of duty-paid inputs in the factory and their use in manufacture. The discrepancies between challans and invoices were explained, and the description variation in trade parlance did not by itself establish inadmissibility of credit. At the same time, the specific credit of Rs. 73,905/- was disallowed because the corresponding invoices were not produced and no contrary evidence was brought on record.

Conclusion: CENVAT credit could not be denied merely on the basis of explained clerical discrepancies, but the disallowance of Rs. 73,905/- was sustained against the assessee.

Issue (ii): Whether the duty demand on scrap cleared without payment of duty and the consequential penalty were sustainable.

Analysis: The demand on scrap was based on clandestine removal, and the appellate authority had already adjusted the advance received while reducing the duty to Rs. 69,317/-. That finding was upheld. Since the demand rested on clandestine removal, penalty equivalent to the duty was held to be warranted, and the earlier penalty of Rs. 10,000/- was enhanced to Rs. 69,317/-, with the statutory reduction to 25% available on timely compliance.

Conclusion: The reduced duty demand on scrap was sustained and the penalty was enhanced against the assessee.

Final Conclusion: The appeal by the Revenue succeeded in part by sustaining the reduced scrap duty demand and enhancing the penalty, while the assessee's challenge to the denial of the disputed credit failed.

Ratio Decidendi: Minor discrepancies in invoices and challans do not justify denial of CENVAT credit when receipt of duty-paid inputs is not disputed, but clandestine removal of scrap attracts duty liability and equal penalty.

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