Cenvat credit requires proof of non-receipt of goods; supplier-side suspicion alone cannot justify denial or penalties.

Cenvat credit cannot be denied merely because the supplier's transactions appear doubtful or invoices are alleged to be fake. The department must produce independent and corroborative evidence showing that the assessee did not receive the goods; investigations only at the supplier's end are insufficient. Where the assessee has supporting records such as transport documents, goods receipt notes, challans and purchase records, and no independent inquiry is made at the assessee's or transporter's end, the allegation of non-receipt remains presumptive. On that basis, the demand for credit, interest and penalties is stated to be unsustainable, and the burden of disproving receipt of goods remains on the Revenue.

---

---

Issues: Whether Cenvat credit could be denied to the assessee merely on the basis of investigations against the supplier and alleged fake invoices, in the absence of independent evidence showing non-receipt of goods by the assessee.

Analysis: The demand was founded on investigations at the end of the supplier and its upstream suppliers, which suggested that the supplier may not have manufactured the goods and that the invoices may have been bogus. However, no independent investigation was conducted at the assessee's end or at the transporters' end to establish that the goods covered by the invoices were not actually received. The assessee produced documentary records such as transport documents, goods receipt notes, challans and purchase records. The statement relied upon from the assessee's manager was not treated as an inculpatory admission. In these circumstances, the finding of fake invoicing remained presumptive and was not supported by corroborative evidence proving non-receipt of inputs.

Conclusion: Cenvat credit could not be denied to the assessee on the basis of suspicion alone, and the demand for credit, interest and penalties was unsustainable.

Final Conclusion: The Revenue failed to discharge the burden of proving that the assessee had availed credit without receipt of goods, so the credit was upheld.

Ratio Decidendi: Credit under the Cenvat scheme cannot be denied merely because the supplier's transactions appear doubtful unless the department establishes, by independent and corroborative evidence, that the assessee did not receive the goods.

---