2018 (8) TMI 1081 - AT - Central Excise

Exemption under N/N. 202/88- CE dated 20.05.1988 - The case of the department is that they have purchased the raw material i.e. scrap from the ship breaking unit who have cleared the goods under exemption. Therefore the final product is not exempted under the said notification - Held that - It is a trite law that if the material is purchased from the market it should be considered as deemed duty paid only unless proved otherwise. There is a factual error in the show cause notice itself that there is an allegation that they have purchased the material from the ship breaking unit which is incorrect on the face of the record. Since the adjudicating authority has not considered this fact the matter needs to be reconsidered. Appeal allowed by way of remand.

Summary

Issues:
1. Exemption under notification No. 202/88-CE for goods manufactured from duty paid raw material.
2. Dispute over the source of purchased scrap material.
3. Consideration of invoices as proof of purchase source.
4. Allegation of purchasing material from ship breaking unit.
5. Need for reconsideration by the adjudicating authority.

Analysis:
1. The case involved the appellant, a Rolling mill, claiming exemption under notification No. 202/88-CE for goods manufactured using raw material, i.e., scrap. The department contended that since the appellant purchased scrap from a ship breaking unit under exemption, the final product was not eligible for exemption. The Commissioner (A) upheld the demand, leading to the appeal.

2. The appellant argued that they procured scrap from the open market, not the ship breaking unit, which should be deemed duty paid unless proven otherwise. They cited relevant judgments to support their claim, emphasizing the source of purchase as a crucial factor in determining duty payment status.

3. The Revenue reiterated the findings of the impugned order, emphasizing the alleged purchase from the ship breaking unit. However, the Tribunal observed that the invoices submitted by the appellant clearly indicated purchases from various scrap traders in the market. The Tribunal noted that the adjudicating authority failed to consider this crucial fact, leading to a factual error in the show cause notice.

4. Given the factual discrepancy and the importance of verifying the source of purchased scrap, the Tribunal set aside the impugned order and remanded the matter to the adjudicating authority for reconsideration. The Tribunal directed a fresh assessment based on the source of scrap purchase, as highlighted by the appellant's submissions and supported by relevant legal precedents.

5. In conclusion, the appeal was allowed by way of remand, emphasizing the need for a thorough examination of the source of purchased scrap material to determine its duty payment status accurately. The Tribunal's decision aimed to ensure a fair assessment based on factual accuracy and legal principles, highlighting the importance of proper consideration of evidence in tax exemption cases.