2006 (11) TMI 8 - SC - Central Excise

Central Excise Wire rods and bars Appellant manufacture wire rods and bars of iron and steel from old and used railway materials as inputs Revenue has failed to show that the inputs used by appellant are clearly recognizable being non-duty paid Entitled to exemption under Notification No. 202/88-CE dt. 20.5.1988

Summary

Issues involved: Interpretation of excise duty exemption notification for wire rods and bars of iron and steel made from old MS scrap; Whether appellant is entitled to exemption under Notification No. 202/88-CE.

Analysis:
The appeal before the Supreme Court involved a dispute regarding the entitlement of M/s Mohan Steels Ltd. to exemption from payment of excise duty under Notification No. 202/88-CE for manufacturing wire rods and bars of iron and steel from old MS scrap. The notification provided an exemption for goods falling within specific chapters of the Central Excise Tariff Act 1985 when made from goods specified in the notification. The appellant used old railway materials as inputs, claiming them to be old MS scrap purchased from kabadis who acquired them from government auctions. The authorities denied the benefit of the notification to the appellant based on the contention that the inputs did not match the specified description in the notification.

The Supreme Court analyzed the notification's explanation, which presumed that all stocks of inputs were duty paid unless clearly identifiable as non-duty paid. The Revenue failed to demonstrate that the appellant's inputs were non-duty paid, thus upholding the initial presumption in favor of the appellant. The Court referred to a previous judgment in Vivek Re-Rolling Mills vs. Collector of Central Excise, where a similar exemption notification was considered. In that case, the Court had reversed the Tribunal's decision and granted the appellant the benefit of the exemption notification, citing similar reasoning.

Ultimately, the Supreme Court accepted the appeal, setting aside the Tribunal's order and ruling that the appellant was indeed entitled to the benefit of the exemption notification under No. 202/88-CE. The judgment highlighted the importance of interpreting excise duty exemption notifications in favor of the taxpayer when the conditions specified in the notification are met, emphasizing the need for authorities to rebut the initial presumption in such cases.