Cenvat credit on supplementary invoices depends on proven evasion-related conduct in the supplier's case, not recipient-side assumptions.

Cenvat credit on supplementary invoices may be denied only where the supplier's differential duty is recoverable because of fraud, collusion, wilful misstatement, suppression of facts, or a similar evasion-related contravention established in the supplier's proceedings. Where the supplier's show cause notice did not invoke the extended period or propose penalty for such conduct, and the adjudication under Section 11A(2) did not record the necessary foundational allegation, the recipient-side authority cannot independently treat the differential duty as arising from evasion. On that basis, credit on the supplementary invoices was held admissible and the associated duty, interest, and penalties were unsustainable.

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Issues: Whether Cenvat credit could be denied on supplementary invoices issued by the supplier unit when the duty differential paid at the supplier's end was not shown to have arisen from fraud, collusion, wilful misstatement or suppression of facts with intent to evade duty.

Analysis: Rule 57AE(1)(i) of the Central Excise Rules, 1944 permits denial of credit on supplementary invoices only where the additional duty became recoverable from the supplier by reason of non-levy or short levy attributable to fraud, collusion, wilful misstatement, suppression of facts, or contravention of the Act or Rules with intent to evade duty. The show cause notices issued to the supplier unit did not invoke the extended period under Section 11A(1) of the Central Excise Act, 1944 and did not propose penalty under Section 11AC of the Central Excise Act, 1944. The jurisdictional adjudication of the supplier unit also confirmed duty under Section 11A(2) without recording the foundational allegation required to attract the credit bar. The recipient-side adjudicating authority could not independently decide that the supplier's differential duty arose from such evasion-related conduct when that issue had not been established against the supplier unit in the proceedings governing the demand.

Conclusion: Credit on the supplementary invoices was admissible and the denial of Cenvat credit was unsustainable. The demand of duty, interest, and penalties could not be sustained.

Ratio Decidendi: Denial of credit on supplementary invoices is permissible only when the supplier's differential duty is recoverable on account of fraud, collusion, wilful misstatement, suppression of facts, or similar evasion-related conduct established in the supplier's proceedings.

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