Untested statements and selective third-party material cannot displace statutory records for CENVAT credit denial.

Untested statements recorded during investigation could not be relied upon because section 9D compliance was absent and cross-examination was denied, so those statements were excluded from evidence. CENVAT credit also could not be disallowed on the basis of selective transporter statements and vehicle-registration discrepancies when statutory records, returns, books of account and banking-channel payments supported receipt and consumption of inputs, and no corroborative enquiry showed non-receipt. The assessee's credit claim was upheld, and the related interest and penalties, including the penalty on the director, were set aside.

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Issues: (i) Whether statements recorded during investigation could be relied upon without compliance with section 9D of the Central Excise Act, 1944 and without granting cross-examination. (ii) Whether CENVAT credit could be denied merely on selective transporter statements and vehicle-registration discrepancies in the absence of corroborative evidence of non-receipt of inputs.

Issue (i): Whether statements recorded during investigation could be relied upon without compliance with section 9D of the Central Excise Act, 1944 and without granting cross-examination.

Analysis: The entire demand was founded on statements recorded from dealers, transporters and the director. The record showed that these statements were not tested in the manner required by section 9D of the Central Excise Act, 1944. The requested cross-examination was also denied. In such circumstances, the statements could not be treated as admissible evidence and had to be eschewed from consideration.

Conclusion: The reliance placed on untested statements was not sustainable against the assessee.

Issue (ii): Whether CENVAT credit could be denied merely on selective transporter statements and vehicle-registration discrepancies in the absence of corroborative evidence of non-receipt of inputs.

Analysis: The assessee's receipt of inputs was reflected in statutory records, returns, books of account and banking-channel payments. The finished goods were manufactured and cleared on payment of duty. No stock verification, factory-level enquiry, or meaningful corroborative investigation was conducted. The denial rested largely on a small sample of invoices and on third-party material, which was insufficient to displace the documentary trail showing receipt and consumption of inputs.

Conclusion: The disallowance of CENVAT credit, and the consequential interest and penalties including the penalty on the director, were not justified.

Final Conclusion: The assessee's credit claim was upheld and the connected penal consequences were set aside.

Ratio Decidendi: In Central Excise adjudication, untested statements recorded during investigation cannot be relied upon without compliance with section 9D, and CENVAT credit cannot be denied on suspicion or selective third-party material when statutory records and surrounding evidence support receipt and use of inputs.

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