Cenvat credit demands based on untested third-party statements fail without Section 9D compliance and corroborative evidence.

Cenvat credit cannot be denied solely on third-party statements, dealer records, or allegations that suppliers were non-existent unless the statements satisfy Section 9D of the Central Excise Act and the Revenue produces corroborative evidence against the assessee. Where cross-examination is refused and the record lacks independent proof of non-receipt of goods or conscious participation in bogus billing, the evidentiary basis for demand and penalty fails. On those facts, the denial of credit and the consequential penalty were held unsustainable, and the impugned order was set aside.

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Issues: Whether the Cenvat credit could be denied and the demand sustained solely on the basis of third-party statements, dealer records, and non-existence allegations against suppliers, without compliance with Section 9D and without corroborative evidence against the appellant.

Analysis: The demand was founded principally on statements of third parties and material collected during investigation from other entities. The appellant had sought cross-examination of the witnesses, but it was declined. Such statements, when relied upon against an affected party, must satisfy the requirements of Section 9D of the Central Excise Act, 1944. The absence of cross-examination and the use of untested third-party material materially weakened the evidentiary basis of the demand. The record also lacked independent corroboration showing receipt of no goods by the appellant or its conscious involvement in any bogus billing arrangement. Mere non-existence of some suppliers or dealers was not enough, by itself, to fasten liability on the appellant when the invoices carried the requisite particulars and no tangible evidence established clandestine conduct by the appellant.

Conclusion: The denial of Cenvat credit and the consequential penalty were unsustainable; the appeal succeeded and the impugned order was set aside.

Ratio Decidendi: A demand based on third-party statements or supplier-side irregularities cannot be sustained against an assessee unless the statements are admissible under Section 9D and the Revenue independently proves the assessee's involvement with corroborative evidence.

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