1997 (3) TMI 326 - AT - Central Excise

Summary

Issues involved:

1. Availment of deemed credit on old and used scrap of iron and steel.
2. Definition and recognition of non-duty paid scrap.
3. Interpretation of Ministry's order dated 7-4-1986 and subsequent clarifications.
4. Burden of proof regarding duty status of scrap.
5. Applicability of Tribunal's decisions on similar matters.

Detailed Analysis:

1. Availment of deemed credit on old and used scrap of iron and steel:

The Revenue appealed against the Order-in-Appeal dated 30-10-1987, which overturned the Order-in-Original dated 9-1-1987. The core issue was whether the respondents were entitled to avail deemed credit for old and used scrap of iron and steel under the Ministry's order dated 7-4-1986. The adjudicating authority had observed that the scrap consisted of items like cycle parts, agricultural implements, and household utensils, which were not duty-paid.

2. Definition and recognition of non-duty paid scrap:

The respondents argued that the scrap from the open market could not be clearly recognized as non-duty paid. The Collector of Central Excise (Appeals) noted that the nature of the scrap was irrelevant without a definition of waste and scrap in Notification No. 177/86-C.E. or the direction dated 7-4-1986. The Revenue contended that the deemed credit was not available for scrap in rusty and dusty condition, as it was clearly recognizable as non-duty paid.

3. Interpretation of Ministry's order dated 7-4-1986 and subsequent clarifications:

The Ministry's order dated 7-4-1986 allowed deemed credit for iron and steel articles unless the inputs were clearly recognizable as non-duty paid. This was further clarified by the Ministry's order dated 29-9-1986, which stated that waste and scrap like bazar scrap, clearly recognizable as non-duty paid, were not entitled to deemed credit, even before 29-9-1986.

4. Burden of proof regarding duty status of scrap:

The respondents argued that the burden was on the Revenue to prove that the inputs were non-duty paid. The Tribunal found that the scrap described in the adjudication order consisted of discarded items not resulting from a manufacturing process and thus not excisable. Consequently, the question of duty payment did not arise. The deemed credit provision aimed to address situations where excisable and dutiable goods were purchased without duty-paying documents, not to cover non-excisable items.

5. Applicability of Tribunal's decisions on similar matters:

The Tribunal referred to similar cases, such as Jagat Singh Steel Pvt. Ltd. v. Collector of Central Excise, Chandigarh, and the Larger Bench decision in M/s. Machine Builders & Ors. v. Collector of Central Excise, Bolpur. These cases established that the deemed credit scheme was intended for inputs on which duty had actually been paid but could not be documented, not for non-duty paid inputs. The Tribunal concluded that the scrap in question, being non-excisable, did not qualify for deemed credit.

Conclusion:

The Tribunal disagreed with the Collector of Central Excise (Appeals) and restored the Order-in-Original by the Assistant Collector of Central Excise, Ghaziabad. The appeal by the Revenue was allowed, confirming that the respondents were not entitled to deemed credit for the old and used scrap of iron and steel, as it was clearly recognizable as non-duty paid.