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TMI Blog1993 (9) TMI 127X X X X Extracts X X X X X X X X Extracts X X X X ..... are produced or manufactured. The rate of duty has been specified in the Schedule to the Central Excise Tariff Act, 1985 (as amended by the Finance Bill, 1986). Chapter 72 of the Schedule deals with iron and steel. 3.In the Finance Bill, 1986, a Scheme called `MODVAT' (Modified Value Added Tax) was introduced "by which duty once paid on a component or raw material could be set-off for purposes of duty on the final product." In order to effectively implement the Scheme, Rules 57A to 57J were promulgated and added to the Central Excise Rules, 1944 (hereinafter called `the Rules'). Under Rule 57A the Central Government was empowered to notify the inputs as well as the final products which were to qualify for credit of the excise duty "paid on the goods used in or in relation to the manufacture of the said final products......" In exercise of this power, the Central Government issued a notification on March 1, 1986, a copy of which has been produced as Annexure P. 6 with the writ petition. The notification inter alia specified Chapter 72 in the list of inputs as well as that of the final products which qualified for benefits under the MODVAT Scheme. Rule 57G laid down the procedure w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of waste scrap evidencing the purchase and genuineness of deemed credit taken." After exchange of certain other communications, two assessment orders were passed on September 23, 1986. Copies of these orders are on record as Annexure P. 17 and P. 18. By the order at Annexure P. 17, the appellant was directed to deposit the amount of Rs. 43,18,663.52p. by disallowing the credit claimed by it. By the order at Annexure P. 18 the authority disallowed credit for the amount of Rs. 3,45,819.25p. for the month of August, 1986 and directed that it be deposited. Aggrieved by these orders, the appellants approached this Court in the writ petition out of which the present appeal has arisen. In the petition, it was primarily contended that the action was violative of the principles of natural justice as no opportunity whatsoever had been given to the appellants. 6.On behalf of the respondents, it was inter alia pleaded that show cause notice dated December 5, 1986 had been actually issued to the appellant. The petition was premature. It was further pointed out that the appellant had effective alternative remedy under the Act and the writ petition was not maintainable. The claim made by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emed to have been paid on all goods before leaving the factory premises and once the manufacturer shows that the scrap was purchased from the market and was lying in stock during the period from March 1, 1986 to August 28, 1986, he is entitled to avail of the deemed credit. He further submitted that the requirements of the main part of the order dated April 7, 1986 having been satisfied, the burden would be on the department to show that the input was covered by one of the exceptions. Learned counsel also contended that the appellant was entitled to the credit for all stocks in hand on August 28, 1986 and a writ of mandamus as prayed for should have been issued. The claim made on behalf of the appellant was controverted by Mr. S.K. Pipat, learned Senior Standing Counsel for the Union of India. He contended that in view of the provisions of the Rules, credit could be claimed only after it was proved that the duty had been duly paid on the inputs. The burden of proof lay on the person, who claimed the credit. 10.In order to consider the respective contentions raised by the learned Counsel for the parties, it is apt to notice that the MODVAT Scheme was introduced primarily to ensure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of duty taken as credit. He has also to furnish the extracts of Parts I and II of Form RG 23A. It is also incumbent on the manufacturer to make available the documents evidencing the payment of duty on the inputs, if required to do so by the proper officer. 12.It was in exercise of the power under the second proviso to Rule 57G(2) that the Central Government had issued the order dated April 7, 1986 (Annexure P. 3). This order was issued on account of the representation having been made by the industry. It was pointed out that "because of their inability to produce duty paying documents in respect of the aforesaid goods used by them as inputs, they were not able to avail of the benefit, under the rules." In this background, the Government issued the following directions :- "..... The inputs specified in column (2) of the table hereto annexed and falling under the heading Nos. of the schedule to the Central Excise Tariff Act, 1985 (5 of 1986) specified in the corresponding entry in column (3) of the said table, purchased from outside and lying in stock on or after 1-3-1986 with the manufacturer, for the manufacture of final products specified in the Notification No. 177/86-C.E. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aste and scrap of zinc. 79.01 and 79.02 Rs. 3600 per tonne. Sd/- R.K. Chandra Deputy Secretary to the Government of India." 13. On a perusal of the above order we are of the opinion that the industry having represented to the Government that even though a manufacturer was entitled to avail of credit of the specified duty paid on inputs, the benefit thereof was not available to the manufacturers because of their inability to produce evidence with regard to the payment of duty. In this background, the Central Government had authorised the manufacturers to claim credit at the specified rates for different kinds of inputs. This benefit was, however, available only in respect of the goods "purchased from outside and lying in stock on or after 1-3-1986 with the manufacturer for the manufacture of final products...." Different rates at which the duty was to be deemed to have been paid were specified. If the input was Iron, duty could be deemed to have been paid @ Rs. 80/- per tonne. If the input was steel and articles thereof, the specified rate was Rs. 365/- per tonne. It is for the manufacturer, who claims credit @ Rs. 365/- per tonne, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by a particular manufacturer? This can be ascertained only when the manufacturer files a definite return or reply to the show cause notice and produces the evidence in support of its claim. It is then that the competent authority shall determine as to whether or not the evidence produced by the manufacturer is sufficient to prove that the input claimed by the manufacturer was actually used or that the case falls within one of the three exceptions specified in the order. The grievance of the appellant that the learned Single Judge has placed the burden on the manufacturer is totally misconceived. According to the learned Single Judge, the manufacturer has to take a definite stand. We find that the view taken by the learned Single Judge is wholly unexceptionable. 16. Mr. Rama Swamy then contended that the appellants are entitled to claim credit on all stocks in hand on August 28, 1986. On a perusal of the judgment of the learned Single Judge, we find that nothing to the contrary has been held. Consequently, nothing more need be said on this aspect of the matter. 17. Excise duty is levied to finance the Scheme for the development and defence of the country. MODVAT was introduce ..... X X X X Extracts X X X X X X X X Extracts X X X X
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