2000 (5) TMI 218 - AT - Central Excise

Summary

Issues:
1. Entitlement to benefit of Notification 275/88 for scrap cleared from own factory at nil rate of duty.
2. Recognition of scrap as non-duty paid or charged to nil rate of duty.
3. Exemption eligibility for final products manufactured from scrap purchased from open market.

Analysis:
1. The appeal concerned the entitlement to the benefit of Notification 275/88 for scrap cleared from the factory at nil rate of duty. The Collector of Central Excise held that the appellants were not entitled to this benefit as the scrap was recognisable as non-duty paid or charged to nil rate of duty. The Department issued a show cause notice for recovery, which was adjudicated by the Assistant Collector in favor of the assessees. However, the Collector (Appeals) ruled against the assessees, denying exemption for final products made from scrap received from their own factory or purchased from the open market.

2. The dispute revolved around the recognition of scrap as non-duty paid or charged to nil rate of duty. The appellants claimed exemption for unmachined iron castings under the Notification. The Assistant Collector considered waste and scrap from Plant No. 1 as out of duty paid material and dropped the proceedings. On appeal, the Collector (Appeals) held that exemption was not admissible for final products made from scrap cleared at nil rate of duty or purchased from the open market. The Tribunal observed that the burden of proving that open market scrap is non-duty paid lies with the Revenue. The assessees provided invoices showing purchase from the open market, not kabaris, and the onus was not discharged by the Revenue to prove otherwise.

3. The issue of exemption eligibility for final products manufactured from scrap purchased from the open market was crucial. The Tribunal found that the lower appellate authority's conclusion that the assessees purchased bazaar scrap beyond the charge in the show cause notice was not substantiated. The scrap from the open market was deemed duty paid, and the Revenue failed to prove otherwise. As a result, the Tribunal upheld the denial of exemption for products made from scrap purchased from Plant No. 1 but set aside the denial for products made from open market scrap, holding them eligible for exemption under Notification 275/88.

In conclusion, the appeal was partly allowed, with the Tribunal upholding the denial of exemption for products made from scrap purchased from the assessees' own factory but granting exemption for products made from scrap purchased from the open market, as per the provisions of Notification 275/88.