Cenvat credit and limitation: proper records and absence of suppression defeat denial and extended-period demand.

Cenvat credit on inputs purchased from a first stage dealer was upheld because the assessee maintained statutory records of receipt, consumption, inventory, gate registers, ledger entries, bank payments and production, and had taken reasonable steps to verify the supplier. The Revenue's allegation of non-receipt of goods and use of parallel invoices failed for want of positive evidence, including any stock shortage or proof of fabricated invoices. The demand was also held time-barred because the record did not show suppression, fraud, collusion or misstatement, so the extended period of limitation was not available.

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Issues: (i) whether Cenvat credit was admissible on inputs purchased from a first stage dealer where the Revenue alleged non-receipt of goods and use of parallel invoices; (ii) whether the demand was barred by limitation and the extended period could be invoked.

Issue (i): whether Cenvat credit was admissible on inputs purchased from a first stage dealer where the Revenue alleged non-receipt of goods and use of parallel invoices.

Analysis: The respondents maintained statutory records showing receipt, consumption and inventory of inputs, together with gate/security registers, ledger entries, bank payments and production records. The evidence on which the Revenue relied was found insufficient to displace these records, as there was no positive proof that the goods covered by the invoices were not received in the factory, no allegation that the respondents fabricated invoices, and no adverse finding such as stock shortage. The respondents had taken reasonable steps to verify the supplier's identity and address, which satisfied the requirement under the Cenvat credit scheme.

Conclusion: Cenvat credit was held admissible and the denial proposed by the Revenue was rejected.

Issue (ii): whether the demand was barred by limitation and the extended period could be invoked.

Analysis: The notices were issued for a period much earlier than the date of issuance, while the record did not show wilful suppression, fraud, collusion or misstatement by the respondents. In the absence of ingredients necessary for invoking the extended period, the demand could not be sustained beyond the normal limitation period.

Conclusion: The demand was held time-barred and the extended period was held not invocable.

Final Conclusion: The Revenue's appeals failed, the Commissioner's order dropping the demands was sustained, and the connected cross-objections stood disposed of.

Ratio Decidendi: Where an assessee maintains proper statutory records and takes reasonable steps to verify the supplier, Cenvat credit cannot be denied merely on suspicion or third-party investigation unless the Revenue proves non-receipt of inputs or other positive evidence of irregularity; in the absence of suppression or fraud, the extended period of limitation is not available.

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