Cenvat credit on fictitious supplier invoices attracts penalty where due verification of transaction genuineness is absent.

Cenvat credit taken on invoices issued by a fictitious supplier was treated as unsustainable where the assessee failed to show reasonable verification of the supplier's genuineness. The governing rules required due precaution before availing credit, and breach of those requirements attracted penalty. Because the underlying transaction was tainted by fraud, the credit could not be regarded as validly availed. The reduced penalty imposed by the authorities was found consistent with the proved facts and applicable rules, and the penalty was upheld against the assessee.

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Issues: Whether penalty was sustainable where the assessee availed Cenvat credit on invoices issued by a fictitious supplier without verifying genuineness of the transaction.

Analysis: The credit was taken on invoices issued by a supplier found to be fictitious, and the assessee did not establish due verification of the supplier's genuineness. The rules required reasonable precaution while taking credit, and contravention of those rules attracted penalty. Once the underlying transaction was tainted by fraud, the availment of credit could not be treated as valid. The reduction of penalty by the authorities was found to be consistent with the proved facts and the governing rules.

Conclusion: The penalty was upheld and the issue was decided against the assessee and in favour of the Revenue.

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