Cenvat credit and stock shortage demands fail where notices lack specifics and evidence rests on mere estimation.

Cenvat credit denial was unsustainable where the show cause notice did not specifically allege that the inputs were non-duty paid, not received in the factory, or not used in production; such unparticularised allegations could not justify disallowance, so the credit disallowance was set aside. Duty demand for alleged stock shortage was also unsustainable because the goods had not reached RG-1 stage and were not required to be reflected as finished stock in the same manner as completed goods; that demand was set aside. A further demand based only on eye estimation, without actual weighment or reliable stock verification, lacked evidentiary certainty and was similarly set aside, resulting in relief to the assessee.

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Issues: (i) Whether denial of Cenvat credit was sustainable when the show cause notice did not allege that the inputs were non-duty paid, not received in the factory, or not used in production; (ii) Whether the duty demand for alleged shortage of goods was sustainable when the goods had not reached the RG-1 stage; (iii) Whether a duty demand based on eye estimation of stock shortage was sustainable.

Issue (i): Whether denial of Cenvat credit was sustainable when the show cause notice did not allege that the inputs were non-duty paid, not received in the factory, or not used in production.

Analysis: The absence of specific allegations regarding the duty-paid character of inputs, their receipt in the factory, and their use in production goes to the root of Cenvat credit denial. In such circumstances, credit cannot be disallowed merely on a general allegation of irregular availment.

Conclusion: The denial of Cenvat credit was not sustainable and was set aside in favour of the assessee.

Issue (ii): Whether the duty demand for alleged shortage of goods was sustainable when the goods had not reached the RG-1 stage.

Analysis: Goods which have not reached the RG-1 stage are not required to be reflected as finished stock in the statutory records in the same manner as completed goods. A shortage worked out in respect of such goods could not, by itself, justify a duty demand.

Conclusion: The duty demand on this count was not sustainable and was set aside in favour of the assessee.

Issue (iii): Whether a duty demand based on eye estimation of stock shortage was sustainable.

Analysis: A demand founded on eye estimation, without actual weighment or reliable stock verification, is presumptive in nature and lacks the evidentiary certainty required for confirmation of duty.

Conclusion: The demand based on eye estimation was not sustainable and was set aside in favour of the assessee.

Final Conclusion: The assessee's appeal succeeded and the Revenue's appeals failed, resulting in deletion of the sustained demands and relief from the impugned liabilities.

Ratio Decidendi: Cenvat credit cannot be denied, and excise duty cannot be confirmed, on the basis of presumptive or unparticularised allegations unsupported by specific pleadings or reliable evidence.

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