Cenvat credit and section 9D evidence rules limit denial based on questioned suppliers and unproved statements.

Cenvat credit could not be denied merely because the department later questioned the existence of upstream dealers or manufacturers, where the buyer acted on invoices issued by registered suppliers and the record did not disprove receipt and use of goods. The article also states that statements recorded by Central Excise officers cannot be relied on unless the procedure under section 9D is followed; without such compliance, the statements have no evidentiary value. Once those statements were excluded, the remaining material was insufficient to support reversal of credit, interest, or penalties.

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Issues: (i) Whether Cenvat credit could be denied on the basis that the registered manufacturers and dealers were non-existent and the goods were allegedly not received; (ii) Whether the statements relied upon in the show cause notice were admissible without compliance with the procedure prescribed for recording and proving such statements.

Issue (i): Whether Cenvat credit could be denied on the basis that the registered manufacturers and dealers were non-existent and the goods were allegedly not received.

Analysis: The credit dispute turned on whether the appellant had acted on invoices issued by registered dealers and had received and used the goods in manufacture. The department's own records showed that the traders and manufacturers had been registered by the department, and their registrations were cancelled only later. In these circumstances, the appellant could not be expected to investigate the internal correctness of the departmental registration process or the subsequent chain of transactions beyond the registered supplier. The evidence did not justify denial of credit merely on the allegation that the upstream entities were non-existent, especially when the department itself had treated them as existing registrants for a substantial period.

Conclusion: Cenvat credit was not liable to be denied, and the finding went in favour of the assessee.

Issue (ii): Whether the statements relied upon in the show cause notice were admissible without compliance with the procedure prescribed for recording and proving such statements.

Analysis: The statements recorded by Central Excise officers could become relevant only in the manner mandated by section 9D. The adjudicating authority had to first follow the statutory procedure before treating such statements as evidence. No such compliance was shown in respect of the statements relied upon, and therefore those statements could not be used as evidence against the appellant. Once those statements were excluded, the remaining material was insufficient to sustain the demand and penalties.

Conclusion: The statements were inadmissible for want of compliance with the statutory procedure, and this issue was decided in favour of the assessee.

Final Conclusion: The demand of Cenvat credit reversal and the consequential interest and penalties could not survive, and the impugned order was set aside.

Ratio Decidendi: Statements recorded by Central Excise officers are not evidentiary unless the statutory procedure for their admission is strictly followed, and credit cannot be denied to a buyer who deals with registered suppliers merely because the department later disputes the existence of upstream entities.

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