CENVAT credit denial fails where invoices are supported by records and suppression is not proved; demand was time-barred.

CENVAT credit could not be denied where the invoices contained required particulars, receipt of goods was supported by transport records and excise verification, and the department failed to prove the invoices were fake. The assessee was also denied cross-examination of a witness on whose statement the case rested, weakening the department's evidence. Because the credit had been disclosed in ER-1 returns, there was no basis to invoke suppression or the extended limitation period; the resulting demand was time-barred and the penalty could not survive. The appeal succeeded and the impugned order was set aside with consequential relief.

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Issues: (i) Whether the appellant was wrongly denied CENVAT credit on the ground that the invoices were fake or invalid; (ii) Whether the demand and penalty were barred by limitation and unsustainable.

Issue (i): Whether the appellant was wrongly denied CENVAT credit on the ground that the invoices were fake or invalid.

Analysis: The invoices contained the necessary particulars, the appellant's partner stated that the goods were received against those invoices, and the appellant also produced corroborative material including transport documents and a State Excise verification report. The department relied primarily on a statement of an attendant recorded much later than the invoice dates and did not undertake meaningful verification at the supplier's premises. The appellant was also denied cross-examination of the witness whose statement formed the basis of the case. In these circumstances, the burden to prove falsity of the invoices was not discharged by the department.

Conclusion: The denial of CENVAT credit was unsustainable and the finding against the appellant on the genuineness of the invoices failed.

Issue (ii): Whether the demand and penalty were barred by limitation and unsustainable.

Analysis: The credit was disclosed in the relevant ER-1 returns and the show cause notice was issued beyond the normal limitation period. Since the relevant particulars had already been declared to the department, there was no basis to invoke suppression or the extended period. Once the demand itself was time-barred, the penalty could not survive.

Conclusion: The demand was time-barred and the penalty was not maintainable.

Final Conclusion: The appeal succeeded and the impugned order was set aside with consequential relief, if any.

Ratio Decidendi: Where the department fails to prove that invoices are fake and the assessee has disclosed the relevant transactions in statutory returns, CENVAT credit cannot be denied and the extended period and penalty cannot be invoked absent suppression of facts or wilful intent.

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