Separate records for exempted and dutiable clearances defeat denial of Cenvat credit, interest and penalty.

Denial of Cenvat credit, interest and penalty was held unsustainable where the assessee maintained separate records for exempted and dutiable clearances. The dispute centred on whether there was any proven failure to keep separate accounts for exempted and taxable goods. As the show cause notice and adjudication did not clearly establish the alleged lapse, and the factual assertion of separate record maintenance was not seriously disputed, the basis for reversal of credit and the consequential demand for interest and penalty was not made out.

---

---

Issues: Whether denial of Cenvat credit, interest and penalty was justified when the assessee maintained separate records for exempted and dutiable clearances.

Analysis: The dispute turned on whether the assessee had failed to maintain separate records for exempted and dutiable goods. The record showed that the show cause notice and the adjudicating authority had not clearly established the alleged lapse, and the factual assertion that separate records were maintained was not seriously disputed. In these circumstances, the basis for demanding reversal of credit and consequential interest and penalty was not made out.

Conclusion: The denial of credit and the consequential demand, interest and penalty were not sustainable and the assessee succeeded.

---