Cenvat credit on scrap upheld where invoice description differences and price variation did not prove substitution or wrong receipt

Cenvat credit on scrap cannot be denied merely because invoice descriptions vary or the scrap moves through dealers at different prices, where the evidence shows the material was segregated into reusable and meltable forms and the price difference reflects quality and end use. Alleged substitution must be proved by reliable evidence linking the goods received to some other procurement; uncorroborated statements or a mismatch in nomenclature are insufficient. Credit also cannot be denied at the recipient's end simply because of the supplier's duty adjustment. On these principles, the Revenue's challenge failed and the grant of credit was upheld.

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Issues: (i) Whether Cenvat credit could be denied on the basis that the description in the invoices did not exactly match the goods received and the price at which the scrap moved through the chain varied; (ii) whether the alleged substitution of scrap and reliance on statements recorded during investigation justified denial of credit and interference with the adjudicating authority's order.

Issue (i): Whether Cenvat credit could be denied on the basis that the description in the invoices did not exactly match the goods received and the price at which the scrap moved through the chain varied.

Analysis: The evidence showed that the manufacturer's scrap was described in different ways at different times, including MS scrap and various forms of MS offcuts. The material was segregated by first-stage dealers into goods capable of reuse and goods meant for melting, which explained differences in description and price. The price variation was consistent with the quality and end use of the scrap. The mismatch in nomenclature and the difference in price, by themselves, did not establish that the goods received were different from those cleared by the manufacturer.

Conclusion: The denial of credit on the grounds of description mismatch and price variation was not sustainable, and the finding was in favour of the assessee.

Issue (ii): Whether the alleged substitution of scrap and reliance on statements recorded during investigation justified denial of credit and interference with the adjudicating authority's order.

Analysis: The statements of the manufacturer and dealers supported the position that the scrap was segregated and sold in different forms. The alleged incident of substitution was not linked by evidence to the assessee, and no reliable correlation was established between any open-market procurement and the goods covered by the invoices. The statement relied upon by the Revenue did not displace the overall evidentiary picture, and the adjudicating authority's appreciation of the material did not disclose infirmity. Reliance was also placed on the principle that credit cannot be denied at the recipient's end merely because of the manner in which duty was adjusted at the supplier's end.

Conclusion: The allegation of substitution was not proved, and the challenge to the adjudicating authority's order failed, in favour of the assessee.

Final Conclusion: The Revenue's challenge to the grant of credit and the related reliefs failed, and the adjudicating authority's order was affirmed with the Revenue's appeal rejected.

Ratio Decidendi: Cenvat credit cannot be denied merely because scrap is described differently in invoices or moves through dealers at different prices, unless the Revenue proves by reliable evidence that the goods received were not the same goods cleared by the manufacturer or that substitution was actually established.

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