1997 (4) TMI 325 - AT - Central Excise

Summary

Issues:
Availability of deemed Modvat credit on re-rollable scrap purchased from M/s. Rourkela Steel Plant under Ministry's Order dated 1-3-1994 issued under Rule 57G (2) of the Central Excise Rules, 1944.

Detailed Analysis:

1. Availability of Deemed Credit:
The appellants availed deemed Modvat credit on re-rollable scrap from M/s. Rourkela Steel Plant under the Ministry's Order dated 1-3-1994. The authorities denied the credit as M/s. Rourkela Steel Plant had not paid excise duty on the scrap. The dispute centers on the interpretation of the Order and whether the credit should be allowed without duty payment by the original manufacturer.

2. Interpretation of Ministry's Order:
The Ministry's Order dated 1-3-1994 allows re-rollers under Notification No. 1/93 to avail Modvat credit on re-rollable material without proof of duty payment. The appellants argue that the absence of a clause restricting credit for non-duty paid inputs distinguishes this Order from others. They contend that the Department cannot introduce such restrictions when not specified in the Order.

3. Legal Fiction and Duty Liability:
The Order creates a legal fiction where inputs are deemed to have paid duty, benefiting small-scale manufacturers exempted from producing duty payment evidence. The Tribunal finds that the scrap purchased from M/s. Rourkela Steel Plant is akin to material bought from outside and deemed duty-paid, as per the Order's provisions.

4. Lack of Evidence on Duty Payment:
Authorities based their decision on M/s. Rourkela Steel Plant not paying duty on the scrap. However, there is no evidence showing whether duty was initially paid by the manufacturers of the materials sold as scrap. The Tribunal notes that re-rollable scrap, when cleared as scrap, is not subject to duty, aligning with the purpose of the deemed Credit Order.

5. Tribunal's Decision:
The Tribunal rules in favor of the appellants, holding that the deemed Credit was rightfully availed. The impugned Order denying the credit is set aside, allowing the appeal with any consequential relief. The Tribunal emphasizes the absence of a restriction clause in the Order and the intent to transfer the benefit of duty paid to small-scale re-rollers.

This detailed analysis highlights the key arguments, legal interpretations, and the Tribunal's decision regarding the availability of deemed Modvat credit on re-rollable scrap purchased from M/s. Rourkela Steel Plant under the Ministry's Order dated 1-3-1994.