Actual receipt of inputs governs Cenvat credit, while corroborated evidence of undisclosed clearances supports duty demands and penalties.

Cenvat credit requires actual receipt of inputs in the registered factory; credit based on invalid, exhausted or fictitious documents is inadmissible. Diversion records, statements and absence of supporting Cenvat records or supplier invoices supported reversal of credit where imported scrap was not received. Clandestine removal was established through parallel invoices, transport and freight records, booking registers, delivery documents and statements showing clearance of final products without invoices or duty payment. Fraudulent conduct, rather than a procedural lapse, justified the extended limitation period and penalties. The confirmed credit reversal, excise-duty demand, extended limitation and penalties remained enforceable.

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Issues: (i) Whether Cenvat credit was admissible where the imported aluminium scrap was not received in the factory and credit was availed on invalid, exhausted or fictitious documents; (ii) Whether the demand of duty for clandestine removal, invocation of the extended limitation period and penalties were sustainable.

Issue (i): Whether Cenvat credit was admissible where the imported aluminium scrap was not received in the factory and credit was availed on invalid, exhausted or fictitious documents.

Analysis: Rule 3(1) requires receipt of inputs in the factory for availment of credit. Documentary endorsements showed diversion of imported scrap away from the factory; the material was corroborated by statements of the customs house agents and cargo personnel. The appellant did not produce supporting Cenvat records or invoices, while its statements admitted non-receipt of scrap and departmental investigation established that the stated suppliers had made no supplies.

Conclusion: The Cenvat credit was wrongly availed and its reversal was sustainable, against the assessee.

Issue (ii): Whether the demand of duty for clandestine removal, invocation of the extended limitation period and penalties were sustainable.

Analysis: Parallel invoices, transport and freight records, booking registers, delivery documents and statements established clearances of final products without invoices and without payment of duty. The evidence demonstrated fraudulent conduct causing duty evasion, rather than a procedural lapse, and supported invocation of the extended period and imposition of penalties.

Conclusion: The duty demand for clandestine removal, extended limitation and penalties were sustainable, against the assessee.

Final Conclusion: The confirmed reversal of inadmissible credit, excise-duty demand, extended limitation and penalties remain enforceable.

Ratio Decidendi: Cenvat credit is unavailable where inputs are not actually received in the registered factory, and corroborated documentary and testimonial evidence of undisclosed clearances establishes clandestine removal and justifies the extended limitation period where fraud is shown.

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