1997 (4) TMI 271 - AT - Central Excise

Issues:
1. Eligibility for deemed Modvat credit under Rule 57G(2) of the Central Excise Rules, 1944 on lead scrap and waste.
2. Interpretation of whether the material is clearly recognisable as non-duty paid.
3. Application of Government of India order dated 29-9-1986 regarding deemed Modvat credit.
4. Relevance of Tribunal decisions in similar cases.
5. Discrepancy in decisions between the Additional Collector and the Commissioner of Central Excise.

Analysis:

1. The main issue in this appeal is whether the Respondents are entitled to deemed Modvat credit under Rule 57G(2) of the Central Excise Rules, 1944 on lead scrap and waste. The Respondents had taken deemed Modvat credit, but the Additional Collector of Central Excise initiated proceedings against them, alleging that the material was in the nature of non-duty paid Bazar scrap. The Respondents argued that the material obtained by them did not require duty payment as it was lead scrap and waste purchased from various sources.

2. The JDR representing the Appellant contended that the material obtained by the Respondents was clearly recognisable as non-duty paid, citing a previous Tribunal decision in the case of Machine Builders v. Collector of Central Excise. The JDR argued that since the material was in the form of lead scrap and waste, which did not require duty payment, the denial of deemed Modvat credit was justified.

3. On the other hand, the Consultant for the Respondents relied on the Tribunal decision in the case of Kanungo Alloys Pvt. Ltd. to argue that the Department needed to prove that the scrap was clearly recognisable as non-duty paid. The Respondents maintained that the lead scrap they received from various sources, including dealers and traders, should be considered as duty paid, especially since most manufacturers preferred to pay duty due to the complexity of the exemption Notification.

4. The Tribunal analyzed the nature of the material and the sources from which the Respondents obtained the supplies. The material was described as broken, discarded, and worn-out articles, primarily sourced from dealers and traders. The Tribunal noted that the material did not arise from the manufacturing process of lead articles and was not in metallic form. The Tribunal referred to a larger Bench decision, emphasizing the pivotal role of duty payment in the Modvat credit scheme.

5. The Tribunal concluded that the material received by the Respondents, being Bazar scrap and not clearances of scrap by a lead article manufacturer, did not require duty payment. The Tribunal set aside the Commissioner's order, stating that the material was not clearly recognisable as non-duty paid, and the denial of deemed Modvat credit was unjustified. The appeal was allowed in favor of the Respondents, overturning the decision of the Commissioner of Central Excise.

This detailed analysis of the judgment highlights the key issues, arguments presented by both parties, relevant legal precedents, and the Tribunal's reasoning leading to the final decision in the appeal.

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