Cenvat credit cannot be denied for technical lapses where inputs are substantively accounted for; extended limitation also fails absent suppression.
Cenvat credit cannot be denied for mere technical irregularities where the inputs are received, available in the factory, or otherwise substantiated by records; on that basis, credit was allowed except for the amount already reversed. In the absence of fraud, collusion, or suppression with intent to evade duty, the extended limitation period was unavailable, and the consequential demand of interest and penalties could not be sustained. The assessee therefore obtained relief against the balance credit demand and the related penal consequences.
Issues: (i) Whether Cenvat credit was rightly denied on the disputed inputs, including short-received goods, written-off items, cleared-as-such inputs, rejected inputs, Xerox bill of entry, and job-work returns; (ii) Whether the demand, interest, and penalties were sustainable, including on the ground of limitation.
Issue (i): Whether Cenvat credit was rightly denied on the disputed inputs, including short-received goods, written-off items, cleared-as-such inputs, rejected inputs, Xerox bill of entry, and job-work returns.
Analysis: The disputed credit related to multiple annexures covering short receipt, stock variance, write-off, clearance of inputs as such, rejected inputs, proof of import, and job-work clearance. The credited amounts already reversed by the assessee were accepted as Rs. 86,490. For the balance, the inputs were found to be available in the factory or otherwise supported by the record, and technical lapses alone were held insufficient to deny credit where the substantive conditions stood satisfied. The Tribunal relied on the cited precedents and the Board circulars while accepting the assessee's explanation on the major part of the credit.
Conclusion: The denial of Cenvat credit was not justified for the balance amount, and the assessee was held entitled to the credit except for the amount already reversed.
Issue (ii): Whether the demand, interest, and penalties were sustainable, including on the ground of limitation.
Analysis: Since the substantial part of the credit demand was found unsustainable on merits and the assessee had already reversed part of the credit, there was no basis for invoking the longer period. In the absence of fraud, collusion, or suppression with intent to evade duty, the consequential demands of interest and penalties under Section 11AC and Rule 173Q could not be sustained.
Conclusion: The demand was barred by limitation to the extent urged, and the penalties and interest were set aside.
Final Conclusion: The appeal succeeded, and the assessee obtained relief against the credit demand as well as the consequential interest and penalty liabilities.
Ratio Decidendi: Cenvat credit cannot be denied on mere technical irregularities where the inputs are received, available, or otherwise substantively accounted for, and the extended period with penal consequences is unavailable absent fraud, collusion, or suppression with intent to evade duty.