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TMI Blog1989 (12) TMI 60X X X X Extracts X X X X X X X X Extracts X X X X ..... red by them by primarily using waste and scrap of steel commonly known as 'Bazar Scrap'. A scheme was introduced in the Finance Bill, 1986 called the MODVAT Scheme. Under the scheme the manufacturers of excisable goods were allowed credit in the payment of excise duty etc. on the final products from out of the duty already paid on the inputs. In order to implement the scheme Rules 57A to 57J were inserted in the Central Excise Rules, 1944. Under Rule 57A, the Central Government was empowered to notify inputs as well as final products under the Schedule to the Excise Tariff Act, 985, which were to qualify for the said deemed credit. The credit was available subject to the conditions and restrictions specified in the notification. 4. Under the above-mentioned Rule 57A, the Central Government issued Notification No. 177/86-C.E., dated 1-3-1986 Annexure P-2. The notification, inter alia specified Chapter 72 both in the list of inputs as well as that of the final products which qualified for MODVAT Credit Scheme. Chapter 72 of the Central Excise Tariff Act, 1985 deals with iron and steel. Heading 73.02, in particular, deals with 'waste and scrap of iron and steel'. Sub-heading 7203.10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roducts already specified in Notification No. 177/86-C.E., dated March 1,1986, maybe deemed to have paid the duty specified in column 4 of the said notification dated April 7, 1986 without production of documents evidencing payment of duty subject to the restrictions which were spelt out in the notification itself. In the column relating to inputs was included Heading 72.03 relating to waste and scrap of iron and steel and the rate of duty deemed to have been paid and which could be allowed as credit was at the rate of Rs. 365/- per tonne. 6. The petitioners filed declaration with Annexures P-5A to C on March 29, 1986. A classification list Annexure P-6 was also Filed. 7. On August 29,1986, the Central Government issued order Annexure P-9 to the effect that it had been brought to the notice of the Government that in respect of waste and scrap of steel which was exempt from excise duty or which was charged to nil rate of duty credit under MODVAT had been claimed by some manufacturers though no such credit was available in such cases. It was further stated that in order to remove doubts, if any, it was proposed to modify the earlier instructions dated April 7,1986, Annexure P-3, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dit in respect of payment of excise duty on the finished goods taken out of the factory gate after August 29,1986, which had been manufactured out of the raw material purchased by the petitioner on or before August 29,1986. 11. Shri S.S. Dhariwal, Assistant Collector, Central Excise, filed a return. A number of preliminary objections were taken. It was stated that the petition was premature in that the same had been filed when a show cause notice was in the process of being issued to the petitioner. It was added that in accordance with the principles of natural justice a show cause notice was in fact issued on December 5,1986. The petitioner was required to show cause to the Collector, Central Excise, who was to adjudicate the case according to law. The order passed by the Collector, it was added, was appealable to the Customs, Excise and Gold (Control) Appellate Tribunal and the petitioner had thus failed to avail the departmental remedies open to it. The main defence was that the petitioner failed to comply with the conditions in the matter of maintenance of account and submission of return and had claimed credit where it was not due. The petitioner failed to submit the requisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is further settled that where the impugned order has been passed in contravention of principles of natural justice, a writ petition is not dismissed on the threshold on the ground of the existence of an alternative remedy. In the facts of the present case, the assessment orders were passed without a show cause notice and, therefore, the existence of an alternative remedy does not justify the dismissal of the writ petitions. For the foregoing reason, I find no merit in the above objection of the respondents. 15. In the assessment orders Annexures P-17 and P-18 it was, inter alia, stated that the facility of deemed credit on the inputs was not available to the petitioner "from the very beginning" and proceeded to disallow the whole of the amount claimed by way of credit. In other words, the impression conveyed was that modification of the order Annexure P-3 dated April 7,1986, by order Annexure P-9 dated August 29,1986, was retrospective. The contention of the learned counsel for the petitioners is that Annexure P-9 dated August 29,1986, is not retrospective. In other words, the benefit of Ann. P-2 and P-3 remains available to the petitioners for the period March 1,1986 to Augus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n para 2 of the said notification dated March 1,1986, Annexure P-2. 18. The main controversy which survives consideration is as to the scope and precise meaning of the second proviso to Rule 57G(2) of the Rules and order Annexure P-3 dated April 7,1986, issued thereunder. Sub-rule (2), in which the second proviso occurs, reads as under: "(2) A manufacturer who has filed a declaration under sub-rule (1) may, after obtaining the acknowledgement aforesaid, take credit of the duty paid on the inputs received by him : Provided that no credit shall be taken unless the inputs at the time of their receipt in the factory are accompanied or followed subsequently within such period as the Collector of Central Excise may specify in this behalf by a gate pass, an AR-1, a Bill of Entry or any other document as may be prescribed by the Central Board of Excise and Customs constituted under the Central Boards of Revenue Act, 1963 (54 of 1963) in this behalf evidencing the payment of duty on such input: Provided further that having regard to the period that has elapsed since the duty of excise was imposed on any inputs, the position of demand and, supply of the said inputs in the country and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idencing payment of duty on such inputs. The second proviso contains an exception. It empowers the Central Government to notify inputs which would be deemed to be duty paid so as to obviate the necessity of documents showing payment of duty. By the above legal fiction, the Central Government could declare all stocks of inputs in the country to be duty paid for the limited purposes in question without production of duty paying documents. This was, however, subject to the exceptions noted in Rule 57G itself. The second proviso referred to above thus conferred a very wide power on the Central Government with regard to the legal fiction that duty had been paid without production of necessary documents evidencing payment of duty. This is, however, no reason to conclude that the notification issued in pursuance of the said second proviso was equally wide in its sweep. The scope of the notification issued under the second proviso to Rule 57G(2) has necessarily to be gathered from the words used therein. 21. It may be mentioned here that the petitioners placed on record Order-in-Appeal No. 141-CE/CH/88 dated April 28,1988, passed by the Collector (Appeals) in the appeal of Messrs Atul Ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payment of the duty were liable to confiscation. The fact that waste and scrap of steel is openly sold in the market raises the presumption that necessary duty had been paid. It was also argued that the petitioners could not be required to prove a negative proposition that certain input in respect of which they were claiming deemed credit was not a non-duty paid or charged to nil rate of duty item. 24. On a careful consideration, I find myself unable to accept the above contention. It has been stated that the notification Annexure P-3 is in the nature of an exception. The normal rule of construction is that if a person wants to avail of the exception, it is for him to make out a case showing that he is covered by the exception. The issuance of the notification Annexure P-3 dated April 7,1986, and the prescription of the three exceptions reproduced above, clearly indicates that the matter has not been left to presumptions. It is regulated by positive rules, inter alia, by notification issued under Rule 57G(2). The petitioner in order to avail of the deemed credit has to take a stand in the various returns which are required to be filed. It is for the department to verify the stand ..... X X X X Extracts X X X X X X X X Extracts X X X X
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