Cenvat credit denied for invoices from non-existent suppliers where prescribed verification of supplier identity and address was not shown.

Cenvat credit was inadmissible because the assessee did not take the reasonable steps required under Rule 7(2) to verify the identity and address of the invoice-issuing suppliers. The rule treated such steps as satisfied only where the manufacturer personally knew the supplier or verified the supplier through the prescribed certificate-based modes. Investigation showed that the invoices had been issued by fake, bogus and non-existent firms, and the assessee failed to establish any direct verification in the statutory manner. The endorsement through a merchant manufacturer did not cure that defect. Credit was therefore correctly denied as the fraudulent invoices vitiated the claim.

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Issues: Whether Cenvat credit taken on invoices issued by non-existent firms, without the assessee satisfying the prescribed reasonable steps as to the identity and address of the supplier, was admissible.

Analysis: Rule 7(2) of the CENVAT Credit Rules required the manufacturer taking credit to take all reasonable steps to ensure that the inputs had suffered appropriate duty, and the Explanation deemed such steps taken only if the manufacturer satisfied himself about the identity and address of the supplier through personal knowledge or the prescribed certificate-based modes. The invoices in question were found, on investigation and alert circulars, to have been issued by fake, bogus and non-existent firms. The assessee did not establish any direct verification of the suppliers within the statutory modes, and the endorsement through a merchant manufacturer did not satisfy the requirement of verifying the issuing firms. In such circumstances, the fraudulent nature of the invoices vitiated the credit.

Conclusion: The assessee failed to satisfy the statutory requirement of reasonable steps, and the Cenvat credit was correctly denied.

Ratio Decidendi: Cenvat credit is not admissible where the assessee fails to verify the identity and address of the invoice-issuing supplier in the manner required by Rule 7(2), especially when the invoices emanate from non-existent or fraudulent firms.

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