CENVAT credit on input stock requires record-based tally; unsupported stock claims may justify denial of credit.

CENVAT credit on inputs lying in stock is available only where the claimed stock is supported by statutory records and the declared quantities tally with those records. The High Court found that the monthly accounts and other material showed a mismatch in the declared stock on the relevant date, and the assessee had not established correlation between the inputs and the finished goods. On those facts, denial of credit was justified because an unsupported claim could facilitate clandestine removal. The court found the precedent relied on by the assessee inapplicable and upheld disallowance of the credit.

---

---

Issues: Whether CENVAT credit on inputs lying in stock could be denied when the declared stock did not tally with the records and the appellant sought credit without establishing correlation between the inputs and finished goods.

Analysis: The Court noted that the authorities had found, on scrutiny of the monthly accounts and the material on record, that the stock of inputs declared as on the relevant date did not tally. It held that while a manufacturer is entitled to CENVAT credit on stock of inputs, such entitlement extends only to stock duly reflected in the records. Where the stock does not tally, denial of credit is justified, as acceptance of an unsupported claim would facilitate clandestine removal. The precedent relied upon by the appellant was found inapplicable on the facts.

Conclusion: The denial of CENVAT credit was upheld and the issue was decided against the assessee and in favour of the Revenue.

Final Conclusion: The appeal failed, and the orders disallowing the CENVAT credit were sustained.

Ratio Decidendi: CENVAT credit on inputs is allowable only when the claimed stock is supported by and consistent with the statutory records; if the stock does not tally, the credit can be denied.

---