Cenvat credit cannot be denied on third-party allegations when duty-paid invoices and cheque payments support genuine receipt of goods.

Cenvat credit could not be denied where the assessee received inputs under duty-paid invoices from a registered dealer and paid by account payee cheque. Mere allegations based on the dealer's records or third-party statements were insufficient, because the record did not show any cash transaction or non-receipt of goods, and the Revenue failed to conduct independent enquiry to disprove receipt or trace any fraudulent flow of funds. Production of the prescribed invoices satisfied Rule 9(3), and the burden remained on the Revenue to produce tangible evidence of bogus availment. The credit disallowance was therefore unsustainable.

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Issues: Whether Cenvat credit could be denied on the basis of allegations arising from the dealer's records and third-party statements when the assessee had received goods under duty-paid invoices from a registered dealer and made payment by cheque.

Analysis: The available record did not establish any cash transaction between the assessee and the dealer, nor did it show non-receipt of goods. The Director's statement indicated purchase under duty-paid invoice and payment by account payee cheque, and the Revenue did not conduct effective independent enquiry to disprove receipt of the inputs or to verify the encashment trail. In such circumstances, mere reliance on third-party material or dealer-side investigations was insufficient to dislodge credit otherwise supported by invoice documents. The requirement under Rule 9(3) stood satisfied on production of the prescribed invoices, and the burden remained on the Revenue to produce tangible evidence of fraudulent availment or non-receipt of goods.

Conclusion: Cenvat credit could not be denied on the facts proved, and the impugned order disallowing the credit was unsustainable.

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