Cenvat credit denial fails where relied upon documents are withheld and third-party statements lack statutory admissibility and corroboration.

Cenvat credit demand could not be sustained where the remand directions requiring supply of all relied upon documents were not complied with, as this breached natural justice and prejudiced the defence. The demand also failed because it rested mainly on third-party transport records, RTO material and recorded statements without independent corroboration of non-receipt, diversion or alternative procurement, and the statements were not handled in accordance with the statutory requirements for admissibility, including cross-examination. The demand, interest and penalties were therefore set aside and consequential relief followed.

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Issues: (i) Whether the order confirming Cenvat credit demand could be sustained when the relied upon documents directed to be supplied in remand were not furnished to the appellants. (ii) Whether the demand could rest solely on third-party records and statements without compliance with the requirements for admitting such statements in evidence.

Issue (i): Whether the order confirming Cenvat credit demand could be sustained when the relied upon documents directed to be supplied in remand were not furnished to the appellants.

Analysis: The earlier remand had specifically directed supply of all relied upon documents before de novo adjudication. The record showed that the documents were still not supplied, yet the adjudicating authority proceeded to confirm the demand. The absence of the relied upon documents prejudiced the defence and amounted to a breach of natural justice and judicial discipline.

Conclusion: The demand and penalty could not be sustained on this ground and the appellants succeeded on the issue.

Issue (ii): Whether the demand could rest solely on third-party records and statements without compliance with the requirements for admitting such statements in evidence.

Analysis: The demand was founded mainly on transporters' records, RTO material and statements recorded during investigation. Those materials were third-party documents and were not corroborated by independent evidence showing non-receipt of inputs, diversion to the market, or procurement of alternative raw materials. The statements were also retracted and were not dealt with in accordance with the statutory requirements governing admissibility of such statements, including cross-examination and the procedure for reliance on recorded statements. In the absence of cogent corroboration, the evidentiary basis for denying credit was insufficient.

Conclusion: The demand based on third-party records and statements was held unsustainable and the appellants succeeded on this issue as well.

Final Conclusion: The Cenvat credit demand, interest and penalties were set aside and the appeals were allowed with consequential relief.

Ratio Decidendi: A demand denying Cenvat credit cannot be sustained where relied upon documents are withheld in violation of remand directions, and third-party records or recorded statements, without statutory compliance and independent corroboration, are insufficient to establish the charge.

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