1996 (6) TMI 304 - AT - Central Excise

Summary

Issues:
1. Interpretation of invoices issued by scrap dealers.
2. Burden of proof regarding the nature of goods.
3. Validity of show cause notice period.
4. Application of conditional exemption.
5. Discharge of burden of proof by the assessee.
6. Review of lower authority's decision.
7. Reversal of Modvat credit and demands made by the original authority.

Analysis:
The main issue in this case was the interpretation of the invoices issued by scrap dealers, specifically regarding the description of the goods as "brass scrap." The appellant argued that the adjudicating authority incorrectly held that the brass scrap consisted of non-duty paid goods like broken machinery parts. The appellant relied on a judgment by the Larger Bench of the Tribunal, emphasizing that under a conditional notification, the burden of proving eligibility of inputs lies with the Revenue, not the assessee.

Additionally, the appellant contended that the show cause notice issued for a specific period could not cover a period beyond what was specified in the notice. The respondent, defending the lower orders, cited a judgment from the Punjab and Haryana High Court, stating that the burden of proving non-duty paid goods lies with the assessee seeking Modvat credit. However, the appellant argued that this judgment was considered by the Larger Bench in a previous case.

Upon review, the judge found that the invoices did not specify the nature of the brass scrap, leading to the conclusion that the lower authority's belief that the scrap consisted of broken machinery parts was unfounded. The judge highlighted that the original authority failed to examine the submissions made by the assessee, and the Collector merely reiterated the original findings without proper evidence. The judge applied the ratio of the Larger Bench's judgment, stating that the burden of proof had been discharged by the assessee, and it was the Department's responsibility to disprove it.

Consequently, the judge ruled in favor of the appellant, stating that the order of reversal of Modvat credit and demands made by the original authority were not sustainable. The appeal was allowed, and the stay application was also disposed of with the final appeal decision.