1998 (7) TMI 262 - AT - Central Excise

Summary

Issues:
Admissibility of deemed Modvat credit on waste and scrap of iron and steel without production of duty paying documents.

Analysis:
The appellants were engaged in manufacturing iron and steel products and availing Modvat credit. The Department alleged inadmissibility of deemed credit on waste and scrap of iron and steel amounting to Rs. 38,79,137.90 during June to August 1986 due to lack of duty payment evidence and the nature of inputs. The Collector confirmed the demand and imposed a penalty based on the alleged inadmissibility.

The key question identified by the Collector was whether the appellants were entitled to deemed credit without producing duty paying documents. The Collector noted that waste and scrap of iron and steel were exempt from excise duty during the relevant period. The Collector rejected the argument that there was a distinction between goods wholly exempt or charged to Nil rate of duty and non-duty paid goods. The Collector emphasized that even if goods were wholly exempt from duty, they were chargeable to Nil rate of duty, thus not eligible for deemed credit.

The appellants argued that the Central Government had directed certain inputs to be deemed duty paid without requiring proof of duty payment to ease the burden on assessees. They cited judicial precedents supporting the presumption that goods purchased from the market were duty paid unless proven otherwise. The appellants also highlighted their compliance with filing returns and proper declarations.

In defense of the impugned order, the Department relied on case law supporting the Collector's findings and raised concerns about the clarity of invoices regarding the nature of goods. However, the Tribunal carefully considered the arguments from both sides.

The Tribunal referenced previous decisions, including Machine Builder's case, Nahar International Ltd., and Mahavir Spinning Mills, which supported the allowance of deemed credit for scrap purchased from the market under specific conditions. The Tribunal noted that the Department failed to prove that the goods were non-duty paid, as required for denying deemed Modvat credit.

Ultimately, the Tribunal allowed the appeal, granting consequential benefits to the appellants based on the lack of evidence establishing the waste and scrap as non-duty paid, in line with previous decisions where the Department failed to discharge the burden of proof.

In conclusion, the Tribunal sided with the appellants, emphasizing the lack of evidence from the Department to prove that the waste and scrap were non-duty paid, thus allowing the appeal and providing benefits to the appellants.