1996 (8) TMI 183 - AT - Central Excise

Summary

Issues:
1. Availability of deemed Modvat credit on certain inputs.
2. Allegation of non-duty paid or nil rate of duty on inputs.
3. Reliance on Ministry's orders for decision-making.
4. Burden of proof on the assessee.
5. Admissibility of Modvat credit under Central Excise Rules.

Analysis:

1. The case involved the appellants taking deemed Modvat credit on specific inputs as per the Ministry's Order No. B-22/5/86-TRU from 1-3-1987. A show cause notice was issued alleging non-payment of duty on the inputs, leading to a demand for recovery/reversal of the benefit taken during a specific period.

2. The Assistant Collector confirmed the demand based on another Ministry order dated 20-10-1987, which was upheld by the Collector (Appeals), leading to the present appeal against this decision.

3. The appellants argued that the reliance on the later order was misplaced as the earlier order from 7-4-1986 covered the period when the Modvat credit was availed. They claimed that the Assistant Collector's decision was made without giving them an opportunity to present their case adequately.

4. The burden of proof regarding the non-duty paid nature of goods was debated, with the appellants citing relevant legal precedents to support their position that the burden lies on the revenue to investigate and prove the ineligibility of deemed Modvat credit.

5. The Tribunal, after considering the arguments from both parties, found that the denial of credit by the Assistant Collector was based on erroneous logic. The Ministry's orders and trade notices issued later did not apply retroactively to the period in question. The burden of proof was on the revenue to establish the ineligibility of deemed credit, and the Collector's decision upholding the demand was deemed deficient and incorrect.

In conclusion, the appeal was allowed, granting consequential relief to the appellants based on the incorrect application of the law and burden of proof in the case of deemed Modvat credit on inputs.