Physical receipt requirement for CENVAT credit controls where invoices and book entries do not prove actual input receipt.

CENVAT credit was treated as unavailable where the inputs were not physically received in the factory and the supplier had not manufactured or cleared the goods. The analysis applied Rule 4(1) of the CENVAT Credit Rules, 2004 to hold that actual receipt of inputs is a mandatory condition for credit, and Rule 4(5) to place the burden of proving admissibility on the manufacturer. Credit claimed only through invoices, RG-23 records and book entries was found insufficient because the transactions were fictitious paper transactions. The precedent relied on for receipt disputes was distinguished on the basis that this matter involved non-manufacture and non-supply. The remand approach was rejected and the denial of credit, with consequential liability, was upheld.

---

---

Issues: Whether CENVAT credit was admissible on inputs allegedly not physically received by the manufacturer and whether the order remanding the matter to the adjudicating authority could be sustained.

Analysis: The record was found to establish that the supplier had not manufactured or cleared the goods in question and that the transaction chain consisted only of invoices and accounting entries without actual movement or receipt of inputs in the factory. Under Rule 4(1) of the CENVAT Credit Rules, 2004, credit is available only upon physical receipt of inputs in the factory, and the burden to prove admissibility rests on the manufacturer under Rule 4(5) of the CENVAT Credit Rules, 2004. The credit claim based merely on RG-23 records and invoices was treated as insufficient where the underlying goods were not received at all and the transactions were held to be fictitious paper transactions. The cited precedent allowing credit on receipt disputes was distinguished because the present case involved non-manufacture and non-supply by the alleged supplier.

Conclusion: CENVAT credit was held to be inadmissible, the remand order was set aside, and the adjudication order denying credit and imposing consequential liability was upheld.

Ratio Decidendi: Physical receipt of inputs in the factory is a mandatory prerequisite for availing CENVAT credit, and credit cannot be sustained on the basis of invoices or book entries alone where the goods were not actually manufactured, supplied, or received.

---