Cenvat credit and clandestine removal turn on documentary proof, cross-examination, and corroborative records in this mixed tax dispute.

Cenvat credit on PTY was held admissible where cross-examination and contemporaneous challans, invoices and job-work records supported actual receipt and movement of goods through another unit, so denial of credit was not sustainable. By contrast, clandestine removal was established where challan-based clearance to a buyer was supported by matching quantity and date records and no invoice rebutted the finding, so the duty demand was upheld in part and the penalty was reduced to 25% of the confirmed duty.

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Issues: (i) Whether Cenvat credit taken by Unit-I on PTY could be denied on the allegation that invoices were received without actual receipt of goods. (ii) Whether the demand against Unit-II for clandestine removal of PTY was sustainable.

Issue (i): Whether Cenvat credit taken by Unit-I on PTY could be denied on the allegation that invoices were received without actual receipt of goods.

Analysis: The statements relied upon by the Revenue were found, after cross-examination, to support the assessee. The challans and invoices were explained as part of movement of PTY for job work through Unit-II to job workers of Unit-I, and the job workers stated that PTY had in fact been received for job work. The variation in description and value did not establish that Unit-I had taken credit without receipt of goods.

Conclusion: The denial of Cenvat credit was not sustainable and the demand of Rs. 58,68,003/- was set aside in favour of the assessee.

Issue (ii): Whether the demand against Unit-II for clandestine removal of PTY was sustainable.

Analysis: The adjudicating authority had identified challan-based clearance of PTY to M/s. Abhay Trading Co. without a corresponding invoice, and the record contained corroborative documentary evidence matching the quantity and date. In the absence of any invoice rebutting the finding, the clearance of 4015.25 kg of PTY was established as clandestine removal.

Conclusion: The duty demand of Rs. 25,442/- with interest was confirmed against Unit-II and the penalty was reduced to 25% of the duty confirmed.

Final Conclusion: The assessee succeeded on the credit issue, while the duty demand on clandestine clearance was sustained in part, resulting in a mixed outcome with consequential relief on penalty.

Ratio Decidendi: Cenvat credit cannot be denied merely on the basis of disputed statements when cross-examination and contemporaneous records support receipt and use of goods, whereas clandestine removal can be upheld where challans and matching records provide corroborative documentary evidence and no invoice is produced.

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