CENVAT credit proof and independent adjudication required; reliance on subordinate enquiry led to remand for fresh decision.

CENVAT credit is admissible only on receipt of inputs in the factory, and the manufacturer must maintain proper records and prove eligibility. An adjudicating authority cannot decide the dispute by relying on an enquiry conducted by a subordinate officer without itself recording findings on the material before it; such reliance was treated as non-application of mind. The order dropping the demand was set aside and the matter was remanded for de novo adjudication, with both sides given liberty to produce documents and all issues kept open.

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Issues: Whether the order dropping the demand could be sustained when the adjudicating authority relied upon an enquiry conducted by a subordinate officer and whether the matter required remand for fresh decision.

Analysis: CENVAT credit is admissible only on receipt of inputs in the factory, and the manufacturer is required to maintain proper records and bears the burden of proving admissibility. The adjudicating authority entrusted the enquiry to the Superintendent and relied upon the resultant report while deciding the dispute. Such reliance on an enquiry conducted during adjudication by a subordinate officer, without a corresponding correction of the notice, was treated as impermissible and as indicating non-application of mind. The authority deciding the matter was required to record its own findings on the basis of material before it.

Conclusion: The order dropping the proceedings was set aside and the matter was remanded to the Commissioner for de novo adjudication with liberty to both sides to adduce documents and with all issues kept open.

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