1989 (3) TMI 262 - AT - Central Excise

Summary

Issues:
- Denial of deemed MODVAT credit on Copper Waste, Scrap of Aluminum, and unwrought Copper.
- Interpretation of exemption Notifications.
- Eligibility for deemed credit under MODVAT scheme.
- Burden of proof on Department to show non-duty paid status of inputs.

Analysis:
The appeal challenged the denial of deemed MODVAT credit on Copper Waste, Scrap of Aluminum, and unwrought Copper by the Collector of Central Excise (Appeals), Madras. The appellants, engaged in manufacturing Copper-base Alloy products, opted for MODVAT credit after a government order dated 7-4-1986. The Department issued a Show Cause Notice, claiming the inputs were non-duty paid due to specific exemption Notifications. The Department argued that exempted inputs are non-duty paid when used under exemption conditions. The appellants contended that the exemption Notifications deemed all stocks duty paid, making the inputs eligible for deemed credit. They cited precedents where the burden of proof was on the Department to show non-duty paid status. The Department argued that exemption conditions rendered the inputs non-duty paid.

The Tribunal analyzed the exemption Notifications for Copper Waste, Scrap of Aluminum, and unwrought Copper. It noted that Notifications No. 172/84 and 182/84 unconditionally exempted Copper Waste and Scrap of Aluminum, deeming them duty paid. However, Notification No. 149/86 had conditional exemptions for unwrought Copper. The Tribunal held that the Department could deny deemed credit for Copper Waste and Scrap of Aluminum, as they were unconditionally exempt and clearly non-duty paid. In contrast, for unwrought Copper, the appellants were entitled to deemed credit unless the Department proved non-duty paid status. The Tribunal emphasized that the burden of proof lay with the Department to establish non-duty paid status for inputs under conditional exemptions.

The Tribunal's decision aligned with precedents where conditional exemptions required the Department to prove non-duty paid status. It differentiated between unconditional and conditional exemptions, upholding the denial of deemed credit for Copper Waste and Scrap of Aluminum but allowing it for unwrought Copper. The Tribunal emphasized the importance of exemption conditions in determining the eligibility for deemed credit under the MODVAT scheme. Ultimately, the appeal was disposed of in favor of the appellants for unwrought Copper and against them for Copper Waste and Scrap of Aluminum, based on the specific conditions of the exemption Notifications.