TMI Blog1991 (1) TMI 269X X X X Extracts X X X X X X X X Extracts X X X X ..... themselves of the benefit of exemption from duty in terms of Notification No. 208/83 the said inputs stand excluded from the facility of modvat credit in terms of the deemed credit order dated 2-4-1986 as the same provides that no credit shall be allowed. (i) .........:.... ............... (ii) if such inputs are clearly recognisable as being non-duty paid or charged to nil rate of duty. On the above basis it was held that the inputs are not eligible for deemed modvat credit and the credits taken were disallowed. The present appeals have been filed challenging the said decisions. 3. Sri S.K. Bagaria, learned counsel for the appellants, submitted that the deemed modvat credit had been disallowed by the jurisdictional Assistant Collector, which decision had been subsequently upheld by the Collector (Appeals) only on the ground that the galvanised wire had been received by them from the manufacturers thereof, who had availed of exemption from duty and hence did not pay duty. The said inputs are exempted goods. The deemed credit was availed of by the appellants during the period June 1986 to February 1987 for both the appeals. The deemed credit order was in force for this entir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt appeal. He urged that adopting the same views the present appeals may be allowed. He also cited the following decisions of the different Tribunal Benches wherein modvat credit had been held to be admissible in terms of the deemed credit order dated 7-4-1986 where the inputs were wholly exempt from duty but subject to certain conditions. The stand of the department that the inputs being exempt from duty the benefit of deemed credit would not be available in respect of them had been rejected. 1988 (37) E.L.T. 323 1989 (43) E.L.T. 577 1990 (27) ECR 398 He also handed over a note explaining the two courses open to the manufacturers of stranded wire from galvanised wire to press his case that there was no revenue loss by their availing of deemed credit and paying the differential duty on stranded wire. In one method the manufacturer can take modvat credit in respect of duty paid on billets for paying the duty on wire rods and the effective duty liability will be nil. This can be repeated in successive stages of manufacture of galvanised wires and finally stranded wires. At the final stage, the effective duty liability will be only 15% minus Rs. 365 per M.T. This would however ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Arun Auto Springs case where they had rejected the contention that the 30-5-1988 order of the Government had only removed a grey area in the scope of the deemed credit order. The attention of both the counsel and the SDR was invited by the Bench to the judgment of the Punjab and Haryana High Court in the case of Upper India Steel Mfg. Engg. Co. Ltd., 1990 (49) E.L.T. 22 (P H) wherein it has been observed that the normal rule which appears to have been kept in view by the legislature as well as the statutory rules issued under various rules is that where no duty is paid, no credit is allowed and where duty has been only paid partly, credit is allowed only to the extent duty has been paid. It was submitted by Sri Bagaria that it may not be applicable to the facts of the present appeals. In any case, he would refer to the observations of the Supreme Court in the case of Collector of Central Excise v. Decent Dyeing Co. reported in 1990 (45) E.L.T. 201 (SC), where the Supreme Court had held that the burden is on the department to prove the non-duty paid character of the materials purchased from the market. He, therefore, reiterated his plea for allowing of both the appeals. 7. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wires was available till 1-11-1987. The finding of the lower authorities that the provision in the 7-4-1986 deemed credit order regarding inputs being clearly recognisable as being non-duty paid was applicable to galvanized wires and that it was for them to produce sufficient evidence in support of their claim which had not been done and hence Modvat credit is inadmissible for galvanised wire is not sustainable in law. Galvanised wire is not unconditionally exempt in terms of exemption Notification No. 208/83 as amended dated 1-8-1983. Two conditions are there namely raw materials should be duty paid and that no credit of such duty had been taken under Rule 56A or 57A of the Central Excise Rules. Department had not produced any evidence that either of these two conditions that had been fulfilled. The Department s contention that the onus to prove that the galvanised wires are duty paid shifts on the assessee is not tenable. 8. We have considered the contentions raised in the appeal memorandum and the arguments raised in the course of the hearing of the appeal. We have taken note of the judgments and orders cited. Our findings are discussed below. 9. The main thrust of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibility to reduction in terms of the further proviso to each of the notification Nos. 152/77 and 153/77, as amended. The judgement of the Hon ble High Court of Patna was followed by the Tribunal in the case of I.E.L. Ltd. v. Collector of Central Excise, 1988 (35) E.L.T. 142. In applying the ratio of the above decisions to the present issue, we have to take note of the situation in which the matter falls for determination. We are concerned here with the question of grant of modvat benefit. In terms of Rule 57A of the Central Excise Rules, 1944 credit of any duty of excise paid on the goods used in or in relation to the manufacture of final products is allowable for being utilised towards payment of duty leviable on the final products. Thus the provisions with which we are concerned are materially different from the situations that were covered in the Tata Yodogawa and I.E.L. cases. There an exemption was allowable on the products if the raw materials were duty paid. In that context it was held that nil duty paid amounts to duty paid and hence the conditions of the exemption notification were fulfilled and the exemption held to be applicable. The purpose of modvat credit is different ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stipulations that no credit would be allowed (i) ...................... (ii) if such inputs are clearly recognisable as being non-duty paid or charged to nil rate of duty (iii) ............... This condition makes it all the more clear that the deemed credit facility does not rule out the payment of duty which will be the case when complete exemption is availed. On the contrary it is dependent on it, as it should be. Whether the goods wholly exempt from duty under an exemption notification can be said to be charged to nil rate for the purpose of applying the exemption in the deemed credit order may now be taken up. It was argued by the learned counsel for the appellants that the said expression will apply only to goods which carry nil rate of duty under the Tariff and does not apply to goods which carry some rate of duty under the Tariff but are wholly exempt in terms of an exemption notification. The decisions of the West Regional Bench in Arun Auto Springs case is to this effect. It was held in that case that the words charged to nil rate of duty appear to have a special significance. Section 3 of the Central Excises Salt Act is the charging section. Thereunder, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he present case the material has been held to be purchased by the appellants from manufacturers directly who had not paid Central Excise duty thereon, the goods being exempt from duty by virtue of exemption Notification 208/83 dated 1-8-1983. As regards the point that purchases from a manufacturer also constituted purchases from the open market for the purposes of availing deemed credit which point has been pressed by the learned counsel again relying upon the same decision of the West Regional Bench, we find that the Bench had relied upon the judgment of the Supreme Court in Ahura Chemical Products reported in 1981 (8)E.L.T. 613 = 1982 ECR 628D. The question for decision in that case related to exemption from duty on emulsifiers etc. if in respect of the surface active agents used in their manufacture the duty had been already paid or where such surface active agents are purchased from the open market on or after 20th day of January, 1968. Thus one of the criterion for grant of exemption was purchase from the open market on or after the said date. The question was whether purchase from another manufacturer was purchase from the open market and this was answered in the affirmativ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the former. In State of Bihar v. S.K. Roy, AIR 1966 SC 1995 it was held that it is a well recognised principle that subsequent legislation may be looked at in order to see what is the proper interpretation to be put upon the earlier Act where the earlier Act is obscure or ambiguous or readily capable of more than one interpretation. Applying this test to the present case the ambiguity was whether the provisions of the order dated 7-4-1986 seeking to deny the deemed credit order to inputs clearly recognisable as non-duty paid or chargeable to nil rate of duty would apply to goods wholly exempt from duty. In the modvat context where relief to the extent of duty already paid on the inputs is to be extended while charging the outputs to duty the interpretation equating wholly exempted goods with nil duty paid goods would accord with the amended provision. The effect would be no duty - no credit or nil duty - nil credit which is as it should be. 12. Shri Bagaria has relied upon two decisions of the North Regional Bench of the Tribunal in the case of Collector of Central Excise v. Kapson Electrostampings 1988 (37) E.L.T. 323 and the South Regional Bench decision in Rapsri Enginee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the normal rule of construction is that 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. Going by the above principles, it will be for the appellants to produce proof that their inputs are duty paid to disprove the contention of the department that being exempt from duty they are non-duty paid or charged to nil rate of duty. The deemed credit order is only a procedural relaxation, as already pointed out by us supra where production of duty paying documents is dispensed with taking into account the pattern and magnitude of removal of duty paid stocks from the manufacturer s premises and the subsequent marketing pattern and the problems of documentation beyond the first stage of removal. Duty is paid on a large quantity and evidence is required by the modvat beneficiary who gets a small quantity thereof and who does not get any direct evidence of payment of duty. What is dispensed with is the production of evidence of payment of duty and not dispensing with the payment of duty itself. In the circumstances, the lower authorities were right in insisting on evidence of payment of duty and on the appellant s fai ..... X X X X Extracts X X X X X X X X Extracts X X X X
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