Untested statements cannot sustain penalties for alleged bogus invoicing without corroborative evidence or stock discrepancy.

Penalties under Rule 25 of the Central Excise Rules, Rule 26 of the Central Excise Rules and Rule 15A of the Cenvat Credit Rules are not sustainable where the allegation of bogus invoicing and credit rests mainly on untested statements recorded behind the assessee's back. Such statements cannot be safely relied on without cross-examination under Section 9D of the Central Excise Act, especially when the record shows no stock discrepancy, no mismatch in accounts, no proof of clandestine removal, and no corroborative evidence that the goods were not received. On those facts, the penalties were liable to be set aside and consequential relief followed.

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Issues: Whether the penalties imposed on the appellant firm and its partners under Rule 25 of the Central Excise Rules, 2002, Rule 26 of the Central Excise Rules, 2002 and Rule 15A of the Cenvat Credit Rules, 2004 were sustainable on the allegation of issuance of invoices without actual supply of goods and bogus availment of Cenvat credit.

Analysis: The transaction chain up to the appellant was not doubted, and the Revenue's case rested mainly on non-availability of goods at the time of inspection and on statements of transporters and other persons recorded behind the appellants' back. Those persons were neither examined in adjudication nor offered for cross-examination, so their statements could not be safely relied upon in view of Section 9D of the Central Excise Act, 1944. No mismatch in the appellants' records or physical stock on the later search date was found, no truck driver was examined, and no investigation established any alternative destination of the goods if not received by the buyer. The explanation that the goods were with job workers was not disproved, and the records showed the transactions in the ordinary course of business.

Conclusion: The penalties were not sustainable and were liable to be set aside in favour of the appellants.

Final Conclusion: The appeals succeeded, the impugned order was set aside, and consequential relief followed in accordance with law.

Ratio Decidendi: Penalty for alleged bogus supply or credit cannot be sustained on untested statements alone when the witnesses are not made available for cross-examination, the statutory record does not show stock discrepancy or clandestine removal, and the Revenue fails to adduce corroborative evidence of non-supply.

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