Cenvat credit denial based only on third-party investigation fails without corroborative evidence of non-manufacture or non-receipt.

Cenvat credit denial was held unsustainable where the department relied only on an investigation at the supplier's end and did not produce corroborative evidence that the assessee had not manufactured or received the goods. The Tribunal noted record evidence of manufacturing activity, departmental inspections, permissions from the Directorate of Industries and the Pollution Control Board, and movement of goods, which supported the assessee's claim. In the absence of concrete proof rebutting these materials, adverse inference based on suspicion and presumption could not be drawn. The demand and related penalties were therefore set aside.

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Issues: Whether the demand denying Cenvat credit and related penalties could be sustained on the basis of an investigation conducted at the supplier end, without concrete evidence against the assessee showing that it did not manufacture or receive the goods.

Analysis: The Tribunal noted that the assessee had placed record evidence showing manufacturing activity, periodic departmental checks, permissions from the Directorate of Industries and the Pollution Control Board, and movement of goods. It followed earlier Tribunal decisions on identical facts holding that an adverse inference cannot be drawn merely from an investigation at another location, especially when the record also shows entries at toll barriers, departmental verification, and no adverse finding from local authorities. In the absence of corroborative evidence to disprove manufacture or receipt of goods, the allegation rested only on assumption and presumption.

Conclusion: The denial of Cenvat credit was not sustainable, and the demand and penalties were set aside in favour of the assessee.

Ratio Decidendi: A Cenvat credit demand cannot be sustained merely on suspicion or third-party investigation without concrete, corroborative evidence disproving the assessee's manufacture or receipt of goods.

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