CENVAT credit cannot be denied for pending verification or technical invoice defects where duty-paid receipt is otherwise shown.
CENVAT credit could not be denied merely because verification of the supplier's documents and duty-paid nature was pending, especially where the invoices and record otherwise supported receipt of duty-paid goods; the department was left free to verify and recover credit if wrongly availed. Technical defects in invoices, such as the absence of a detailed input description and omission of the duty debit reference, were held not to defeat substantive credit entitlement when consignor, consignee, quantity and duty-paid particulars were disclosed. Penalty under Rule 173Q was also set aside because the dispute was interpretational and no intent to evade duty was shown.
Issues: (i) Whether credit could be denied merely because verification of the supplier's documents and duty-paid nature was pending; (ii) whether credit was inadmissible for want of detailed description of the input in the invoice and for omission of the duty debit reference; (iii) whether the penalty imposed under Rule 173Q of the Central Excise Rules, 1944 was sustainable.
Issue (i): Whether credit could be denied merely because verification of the supplier's documents and duty-paid nature was pending.
Analysis: Credit was disallowed on the ground that investigation against the supplier was in progress, although the adjudicating authority had itself directed verification of the genuineness of the documents and the duty-paid nature of the goods. Denial of credit on a pending-verification basis was held to be inappropriate, while leaving the department free to verify the documents and recover the credit in accordance with law if it was found to have been wrongly availed.
Conclusion: Denial of credit on this ground was not justified and the demand was set aside, subject to the department's right to verify and take action as per law.
Issue (ii): Whether credit was inadmissible for want of detailed description of the input in the invoice and for omission of the duty debit reference.
Analysis: The absence of a detailed input description in the invoice and the omission of the duty debit reference were treated as technical defects. The invoices still disclosed the consignor, consignee, quantity of materials supplied and duty-paid particulars. Such omissions did not affect the substantive entitlement to credit.
Conclusion: Denial of credit on these grounds was not justified and the related demands were set aside.
Issue (iii): Whether the penalty imposed under Rule 173Q of the Central Excise Rules, 1944 was sustainable.
Analysis: The dispute was held to be interpretational in nature and not a case of intention to evade duty. Since substantial relief in credit was granted, the penalty was found to be unwarranted.
Conclusion: The penalty was not sustainable and was set aside.
Final Conclusion: The assessee obtained substantial relief on the disputed credit claims and the penalty was removed, while the department retained liberty to verify the disputed documents and proceed according to law if credit was found to have been wrongly availed.
Ratio Decidendi: Credit cannot be denied on mere pending verification or on technical omissions in invoices where the substantive evidence of duty-paid receipt exists, and penalty is not warranted in an interpretational dispute absent intent to evade duty.
TaxTMI 
AI Drafter ✕
TaxTMI 
