CENVAT credit denial cannot rest only on an adverse RTO report; supporting transport evidence requires fresh verification.

CENVAT credit could not be denied solely on an RTO report suggesting that the invoice vehicle numbers were incapable of transporting the goods, where the duty-paying documents were verified as genuine and payment to suppliers was made by account payee cheque. The assessee also claimed receipt and use of the goods in manufacture, with transportation arranged by it, and had produced cash payment vouchers for freight. Because those vouchers and related evidence had not been examined by the lower authorities, the matter was remanded for fresh verification and an opportunity of hearing before any final denial of credit.

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Issues: Whether CENVAT credit could be denied solely on the basis of the RTO report alleging that the vehicle numbers mentioned in the invoices were incapable of transporting the goods, and whether the matter required remand for verification of the appellants' supporting evidence.

Analysis: The invoices were verified through the jurisdictional Central Excise authorities and the duty-paying documents were found genuine. The records also showed payment to the suppliers by account payee cheques and the defence was that the goods were received and used in manufacture, with transportation arranged by the appellant. The only serious dispute was the adverse inference drawn from the RTO report, and the Tribunal noted that the appellants had produced cash payment vouchers for transportation before it. Since those vouchers and connected evidence had not been examined by the lower authorities, the appellants were to be given an opportunity to place the material before the adjudicating authority.

Conclusion: CENVAT credit could not be finally denied on the existing record, and the matter was remanded for verification of the payment vouchers and other evidence with an opportunity of hearing to the appellants.

Final Conclusion: The impugned orders were set aside and the dispute was sent back for fresh verification of the evidence relating to receipt and transportation of inputs.

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