1993 (6) TMI 168 - AT - Central Excise

Summary

Issues:
Disallowance of deemed credit under Section 11A of the Central Excises & Salt Act, 1944 for purchasing copper/brass scrap from specific entities for final product, alleged contravention of Central Excise Rules, demand for recovery of duty, and imposition of penalties.

Analysis:
The appeal challenged the Order-in-Original disallowing deemed credit of Rs. 2,66,805 under Section 11A of the Act. The appellants, engaged in manufacturing copper-based articles, were accused of wrongly availing credit for copper scrap purchased from specific entities. The investigation revealed the scrap originated from Ammunition Depots, which were not manufacturing units subject to excise duty, rendering the scrap non duty paid. A Show Cause Notice dated 6-6-1991 alleged contraventions of Central Excise Rules and sought recovery of duty and penalties.

The appellants denied the allegations and argued against the extended period for suppression. They contended that the burden lay on the department to prove the scrap was non duty paid. The adjudicating authority disallowed Rs. 2,66,805 of credit within the limitation period but dropped the demand for Rs. 13,84,490 and did not impose penalties. The respondent did not appeal the dropped demand, leaving the disallowed credit as the main issue.

The appellants argued that the scrap was eligible for deemed credit under a specific Notification and the department failed to prove it was non duty paid. They highlighted the need for specific evidence and referenced relevant Notifications. The JDR supported the order, asserting the scrap was non duty paid based on its source from Ammunition Depots. Evidence from MSSIDC, NSIC, and contracts was presented to establish the non duty paid status.

The Tribunal analyzed the eligibility for deemed credit and the requirement for inputs to be clearly recognisable as non duty paid to deny the benefit. It emphasized the need for evidence to prove the exclusion of deemed credit. The lack of evidence regarding the type of scrap at Ammunition Depots led to the conclusion that the scrap was not clearly recognisable as non duty paid. Contracts and statements were deemed insufficient evidence. Consequently, the disallowance of credit was overturned, setting aside the lower authority's order.

In conclusion, the appeal was allowed, and the order disallowing credit was set aside, providing for any consequential reliefs.