2001 (9) TMI 473 - AT - Central Excise

Summary

Issues Involved:
1. Admissibility of exemption under Notification No. 202/88-C.E.
2. Burden of proof regarding duty-paid status of inputs.
3. Invocation of the extended period of limitation.
4. Bona fide belief and reliance on Board's circulars and instructions.
5. Validity of penalties imposed.

Issue-wise Detailed Analysis:

1. Admissibility of Exemption under Notification No. 202/88-C.E.:
Both units, engaged in manufacturing iron and steel products, availed exemption under Notification No. 202/88-C.E., which exempted specified final products from excise duty if made from duty-paid inputs. The appellants argued that materials purchased from the open market should be deemed duty-paid unless proven otherwise by the Department. The Tribunal agreed, citing various Board's circulars and instructions clarifying that materials purchased from the market were to be treated as duty-paid unless there was evidence to the contrary.

2. Burden of Proof Regarding Duty-Paid Status of Inputs:
The Department contended that the burden of proof was on the appellants to establish that the materials were duty-paid. However, the Tribunal noted that the appellants' understanding, supported by Board's circulars, was that market-purchased materials were deemed duty-paid. The Tribunal held that unless the Department could prove that the materials were non-duty paid, they should be considered duty-paid.

3. Invocation of the Extended Period of Limitation:
The show cause notices alleged suppression of facts to invoke the extended period of limitation. The appellants argued that their belief in the duty-paid status of inputs was bona fide, based on Board's circulars and the Department's past acceptance of their declarations. The Tribunal found no evidence of deliberate suppression or intent to evade duty, thus ruling that the extended period was not justifiable.

4. Bona Fide Belief and Reliance on Board's Circulars and Instructions:
The appellants relied on various Board's circulars and instructions, which consistently indicated that materials purchased from the market should be deemed duty-paid. The Tribunal acknowledged this reliance, noting that the appellants filed all requisite declarations and maintained proper records, supporting their bona fide belief in the duty-paid status of their inputs.

5. Validity of Penalties Imposed:
Given the findings on the above issues, the Tribunal found no grounds for the penalties imposed by the Commissioner of Central Excise. The penalties were based on the alleged wrongful availing of exemption and suppression of facts, both of which were not substantiated.

Conclusion:
The Tribunal set aside both impugned orders-in-original, allowing the appeals with consequential benefits to the appellants as per law. The judgment emphasized that the materials purchased from the open market should be deemed duty-paid unless proven otherwise by the Department, and that there was no justification for invoking the extended period of limitation or imposing penalties.