Cenvat credit on dealer invoices upheld where duty payment was verifiable and no sham transaction was shown.

AED (GSI) Cenvat credit on sugar procured through dealers was held admissible because the retrospective amendment to Rule 3 of the Cenvat Credit Rules, 2004 recognised such credit, and the dealer and supplementary invoices had to be read with Rule 11 of the Central Excise Rules, 2002. The absence of original manufacturer invoices with the assessee was not enough to deny credit where dealer invoices referred to the manufacturer's invoices and there was no material to show that the duty was unpaid or the claim was sham. The penalty was therefore not sustainable.

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Issues: Whether Cenvat credit of AED (GSI) was admissible on sugar procured through dealers on the strength of supplementary invoices when the original manufacturer's invoices were not produced, and whether penalty could survive in such circumstances.

Analysis: Credit of AED (GSI) had become admissible by reason of the retrospective amendment to Rule 3 of the Cenvat Credit Rules, 2004. The invoices issued by the dealers, including the supplementary invoices, were to be read in the context of Rule 11 of the Central Excise Rules, 2002. The appellant had furnished the available dealer invoices showing reference to the manufacturer's invoices, and there was no adverse material suggesting that the credit was sham or that the duty had not been paid. The authorities were expected to make adequate enquiry and cross-verification instead of mechanically rejecting the claim merely because the original manufacturer's invoices were not available with the appellant or the first stage dealer.

Conclusion: The Cenvat credit was admissible in favour of the assessee, and the penalty was not sustainable.

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