Cenvat Credit on Documentary Proof: Revenue must prove non-receipt of goods before denying credit for alleged paper transactions

Cenvat credit could not be denied on a bare allegation of paper transactions where the assessee produced duty-paid invoices, RG-23 entries and weightment slips showing receipt and accounting of goods. The documentary evidence was not displaced because the Revenue's investigation was incomplete: no effective inquiry was made with the actual manufacturer-supplier or transporters, and the mere non-existence of the first-stage dealer or absence of a godown, without cancellation of registration or other corroboration, was insufficient. The burden therefore shifted to the Revenue to prove non-receipt of goods, which it failed to do, so denial of credit was held unsustainable.

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Issues: Whether Cenvat credit could be denied on the allegation that the invoices represented only paper transactions and that the goods were not physically received by the assessee.

Analysis: The assessee had produced the invoices on the strength of which credit was taken, the entries were reflected in the RG-23 register, and weightment slips were also on record. The investigation at the supplier end was incomplete because no inquiry was made at the end of the actual manufacturer-supplier or the transporters to verify movement of goods. Mere non-existence of the first-stage dealer or absence of a godown, without cancellation of registration and without further corroboration, was insufficient to displace the documentary evidence produced by the assessee. In such circumstances, the burden shifted to the Revenue to prove non-receipt of goods, which it failed to do.

Conclusion: Denial of Cenvat credit was not sustainable and the issue was decided in favour of the assessee.

Ratio Decidendi: Once an assessee produces duty-paid invoices and supporting records showing receipt and accounting of goods, Cenvat credit cannot be denied on a mere allegation of paper transactions unless the Revenue establishes non-receipt of goods by cogent evidence.

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