Cenvat credit on rubber inputs cannot be denied on presumed excess procurement without proof that statutory conditions were unmet.

Cenvat credit on rubber inputs could not be denied merely because the procurement quantity was considered excessive. Credit remained available where the inputs had suffered duty, entered the factory, were used in manufacture, and were not cleared as such, and the record showed no allegation or investigation rebutting those conditions. A presumption about the optimum quantity required for production was not a valid basis to disallow credit. On that footing, the connected duty demand, interest, and penalty based on the credit denial could not stand, and the personal penalty was reduced.

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Issues: Whether Cenvat credit on rubber inputs could be denied on the basis of an of excess procurement, and whether the related duty demand and penalties were sustainable.

Analysis: The dispute turned on whether the statutory conditions for availing Cenvat credit were satisfied. The inputs had to suffer duty, enter the factory, be used in the manufacture of final products, and not be cleared as such. The record did not show any allegation or investigation negating these core conditions. The denial was founded only on a presumption that the quantity of rubber procured was more than what was required. The adjudicating authority had no legal basis to determine the optimum quantity of input required for production or to disallow credit merely because it considered the input quantity excessive.

Conclusion: The denial of Cenvat credit on rubber was unsustainable, and the connected penalty and interest liability based on that denial could not survive. The personal penalty was also reduced.

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