CENVAT credit on disputed transport evidence requires corroboration; defective invoices alone do not justify blanket denial.

CENVAT credit cannot be denied merely on suspicion or on defective transport particulars without corroborative evidence, and the record must be examined invoice-wise. Where invoices show vehicles incapable of carrying the goods, the assessee bears the burden to prove actual receipt and use of the inputs; in such limited situations, denial of credit may be sustained. Where the vehicles were capable of carrying the goods or the allegation rested only on overload or unverified transport evidence, mere doubt was insufficient, especially when statutory records were maintained and supplier enquiries supported genuineness. The penalty consequences were required to be reconsidered after re-determination of the surviving demand.

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Issues: (i) Whether CENVAT credit could be denied on the strength of invoices showing vehicle numbers of auto rickshaws and on the allegation that the inputs were not actually received; (ii) whether the penalties required reconsideration in view of the partial acceptance and remand.

Issue (i): Whether CENVAT credit could be denied on the strength of invoices showing vehicle numbers of auto rickshaws and on the allegation that the inputs were not actually received.

Analysis: The dispute was founded largely on statements recorded during investigation and the RTO report. For the invoices where the vehicles mentioned were incapable of carrying the goods, the onus shifted to the assessee to establish receipt and use of the inputs. By contrast, where the vehicles were capable of carrying the goods but were allegedly overloaded, mere excess load did not by itself establish non-receipt. For the invoices not based on reliable transport evidence, the record showed that the assessee had maintained statutory records, some enquiries with suppliers had confirmed their existence and genuineness, and the case was not supported by independent investigation at the supplier or transport end. The denial of credit could therefore not be sustained uniformly for all invoices and had to be examined issue-wise.

Conclusion: CENVAT credit was sustainable only to the extent the assessee failed to rebut the allegation regarding invoices showing auto rickshaws, while the remaining disallowance was not justified and was set aside.

Issue (ii): Whether the penalties required reconsideration in view of the partial acceptance and remand.

Analysis: Since the demand itself was being sustained only in part and the matter required fresh determination for the disputed portion, the consequential penalties could not be finally affirmed in the same manner. The penalty on the company and the director had to be re-examined after re-determination of the surviving demand.

Conclusion: The penalties were remanded for reconsideration along with the surviving demand.

Final Conclusion: The appeal succeeded in part, the major demand was set aside except for the limited categories requiring fresh adjudication, and the penalty consequences were sent back for reconsideration.

Ratio Decidendi: CENVAT credit cannot be denied solely on suspicion or on defective transport particulars without supporting independent investigation and corroborative evidence, but where the invoices themselves indicate vehicles incapable of carrying the goods, the assessee must prove actual receipt and use of the inputs.

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