1996 (2) TMI 162 - AT - Central Excise

Summary

Issues Involved:
1. Eligibility for deemed Modvat credit on inputs exempted from duty.
2. Interpretation of Government orders under second proviso to Rule 57G(2) of the Central Excise Rules, 1944.
3. Burden of proof regarding conditional exemptions and duty payment on inputs.

Summary:
1. Eligibility for Deemed Modvat Credit
The primary issue in these appeals was whether manufacturers using inputs exempted from duty could claim deemed Modvat credit based on Government orders issued under the second proviso to Rule 57G(2) of the Central Excise Rules, 1944.

2. Interpretation of Government Orders
The Tribunal examined three Government orders dated 7-4-1986, 2-11-1987, and 20-5-1988, which allowed deemed credit for certain inputs without producing documents evidencing payment of duty. The orders contained exceptions, particularly for inputs "clearly recognizable as being non-duty paid," "charged to nil rate of duty," and "wholly exempted from duty." The Tribunal clarified that these terms should be broadly interpreted to include any inputs on which duty has not been paid for any reason, including exemptions and nil rates in the Tariff Act.

3. Burden of Proof
The Tribunal held that the burden of proof lies with the Revenue to establish that the inputs were non-duty paid when the exemption is conditional. However, the manufacturer must take a definite stand and provide necessary documents to support their claim for deemed credit.

Detailed Judgment:
Appeal E. 72/88
The appellant, manufacturing stranded wire from steel wire, was denied deemed credit as the steel wire was exempt under Notification No. 208/83. However, the Tribunal allowed the appeal on the ground that stranding of wire does not amount to "manufacture."

Appeal E. 384/88
The respondent, manufacturing bolts and nuts from steel wire exempt under Notification No. 208/83, was initially granted deemed credit by the Collector (Appeals). The Tribunal set aside this order, holding that the benefit of deemed credit was not applicable as the input was exempt.

Appeal E. 221/89
The appellant, manufacturing weld mesh from steel wire exempt from duty, was denied deemed credit. The Tribunal dismissed the appeal, affirming that the input was clearly recognizable as non-duty paid.

Appeal E. 190/90
The respondent, using Aluminium Alloy ingots exempt under Notification No. 100/88, was initially granted deemed credit. The Tribunal remanded the case for verification of whether the conditions of the exemption were satisfied.

Appeal E. 252/90
The appellant, manufacturing parts and accessories of Arms and Ammunition from Aluminium Alloy ingots, was denied deemed credit. The Tribunal remanded the case for fresh consideration regarding the applicability of Notification No. 100/88.

Appeals E. 125/91, E. 130/91, and E. 208/92
The appellant, using duty-exempt scrap to manufacture unwrought Aluminium products, was denied deemed credit. The Tribunal dismissed the appeals, affirming that the scrap input was wholly exempt from duty.

Appeal E. 4019/91
The appellant, using Copper Alloy ingots exempt from duty, was denied deemed credit. The Tribunal dismissed the appeal, affirming the non-eligibility for deemed credit.

Conclusion:
The Tribunal provided a comprehensive interpretation of the Government orders under the second proviso to Rule 57G(2), emphasizing the broad scope of terms like "non-duty paid" and "charged to nil rate of duty." The appeals were decided based on whether the inputs were duty-paid or exempt, with specific directions for remand where necessary.