1992 (5) TMI 110 - AT - Central Excise

Summary

Issues:
- Entitlement to deemed credit for steel melting scrap purchased after exemption notification.
- Burden of proof on Department to establish non-duty paid status of goods.
- Interpretation of statutory order permitting deemed credit.
- Application of exemption notification and statutory order to market purchases of steel scrap.

Entitlement to Deemed Credit:
The appeal dealt with the entitlement of the respondent to take deemed credit for "steel melting scrap" purchased after the exemption notification came into effect. The Department argued that the respondent should not be entitled to deemed credit unless they prove that the goods had suffered duty. However, the Tribunal noted that the onus is on the Department to prove that the goods are clearly recognisable as non-duty paid. The Tribunal highlighted that the exemption notification itself is conditional, and a statutory order permitting deemed credit was issued after the exemption notification. Therefore, the Tribunal held that the onus is on the Department to establish the non-duty paid status of the steel scraps to disentitle the respondent from availing deemed MODVAT Credit.

Burden of Proof on Department:
The Tribunal emphasized that the burden of proof lies with the Department to establish that the goods are clearly recognisable as non-duty paid. The Tribunal rejected the argument that the exemption notification automatically shifts the burden onto the respondent, stating that the notification is conditional. The Tribunal upheld the lower authority's decision to allow the deemed MODVAT credit to the respondent as the Department failed to discharge the burden of proving that the goods were non-duty paid.

Interpretation of Statutory Order:
The Tribunal analyzed a statutory order dated 7-4-1986, which directed the allowance of deemed credit for iron and steel scrap purchased from the market if not clearly recognisable as non-duty paid. The Tribunal observed that this order was issued after the exemption notification, indicating the intention of the Government to extend the facility of deemed credit to the trade due to the non-availability of duty paid documents for scrap in the market. The Tribunal concluded that the statutory order should not be deemed superfluous due to the existence of the exemption notification.

Application of Exemption Notification and Statutory Order:
The Tribunal scrutinized the application of the exemption notification and the statutory order to market purchases of steel scrap. The Tribunal rejected the Revenue's argument that all scrap purchased from the market should be treated as non-duty paid due to the exemption notification. The Tribunal highlighted that the intention of the Government was to provide the benefit of deemed credit to the trade for scrap without duty paid documents. The Tribunal held that the burden of proving non-duty paid status should not be placed on the respondent without specific evidence, as the statutory order only denies MODVAT credit in cases where there is direct evidence of non-duty paid status.

In conclusion, the Tribunal dismissed the appeal and affirmed the lower authority's decision to allow the deemed MODVAT credit to the respondent, emphasizing the Department's failure to establish the non-duty paid status of the goods.