1998 (7) TMI 193 - AT - Central Excise

Summary

Issues:
Modvat credit on iron & steel scrap obtained from ship breaking - Allegation of credit taken at a higher rate - Interpretation of Notification No. 5/94-C.E. (NT) dated 1-3-1994 - Whether scrap obtained from Indian or foreign ship - Burden of proof on Department - Opportunity for appellants to provide evidence.

Analysis:
The appeal pertains to M/s. Bansiwala Iron & Steel Rolling Mills regarding Modvat credit on inputs, specifically iron & steel scrap obtained from breaking up a ship. The Revenue contended that the credit was to be restricted to Rs. 920/- per tonne as per Notification No. 5/94-C.E. (NT) if the scrap was obtained from breaking up of Indian ships. The appellant argued that there was no evidence that the scrap was from Indian ships and that the burden of proof lay with the Department.

The appellant submitted that the adjudicating authority's view that ship breaking constituted manufacture in India was unfounded. The Commissioner of Central Excise (Appeals) had not provided any material supporting the claim that the scrap was from Indian ships. The appellant emphasized that the burden of proof rested with the Department, and in the absence of conclusive evidence, the benefit of doubt should favor the appellants.

The Department maintained that the show cause notice clearly alleged that the appellants had taken Modvat credit at a higher rate than permissible under the notification. The appellate authority noted that there was no explicit mention in the order-in-original that the scrap was from Indian ships. The lack of evidence indicating the origin of the scrap raised doubts about the Department's claims.

The Tribunal observed that there was no definitive finding on whether the scrap originated from Indian or foreign ships. As the appellants failed to challenge the allegations or findings effectively, the Tribunal considered it appropriate to remand the case to the Assistant Commissioner for a re-examination. The appellants were granted an opportunity to provide additional information from their suppliers to clarify the source of the scrap.

In conclusion, the Tribunal allowed the appeal by remanding the case for further examination by the jurisdictional Assistant Commissioner. The decision highlighted the importance of establishing the source of inputs for claiming Modvat credit and the necessity for clear evidence to support allegations in such cases.