TMI Blog1991 (1) TMI 277X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of scrap arising in the appellants Steel Plant in the course of manufacture of E.R.W. and SW Pipes from duty-paid H.R. Coil. It is their case that the scrap which arises in the form of HR Coil Ends, known as Tongues, Side Trimming and Turning and...... which are all deemed to be duty-paid materials which are distinguishable as duty-paid scrap. This scrap has no other use except for melting purpose. They had taken Modvat Credit on such scrap in terms of Government of India order F. No. B-22/5/86- T.R.V., dated 7-4-1986 as amended. The credit so taken was disallowed by the Assistant Collector vide his orders dated 18-11-1988 following show cause notices, dated 11-8-1988. It was held by the Assistant Collector with reference to their explanation submitted by them in connection with a similar show cause notice dated 23-5-1988 that the deemed credit facility is not applicable to them in respect of the scrap in question as the same was exempt from duty. The said order granting deemed credit is not applicable as clearly laid down therein where the inputs are clearly recognisable as being non-duty paid or, chargeable to nil rate of duty. The Collector (Appeals) maintained the ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the scope of deemed credit order in view of the nil rate of duty applicable thereto. 5. Shri Mookherjee gave a rejoinder that nil rate of duty referred to in the deemed credit order applied to goods carrying nil rate of duty in the Tariff itself. Goods carrying some rate of duty and being completely exempt from duty were not covered by the entry charged to nil rate of duty and hence they were not excluded from the scope of the said order. He, therefore, reiterated his submission that the impugned orders are not correct in law and require to be struck down. 6. We have considered the submissions made by both the sides and perused the record. We have also gone through the decisions cited by the learned Counsel for the appellants. The case of Kapsons Electro Stampings decided by the North Regional Bench of the Tribunal which was followed by the same Bench in the Electricals Switchgears matter, both of which were relied upon by Shri Mookherjee and which are referred to at Serial Nos. (1) and (3) of the List of cases furnished in para 3 supra relates to Modvat availment in respect of HR/CR sheets purchased from the open market. The stand of the lower authorities that the prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re. In the Kapsons and Electrical Switchgears cases the inputs HR/CR sheets had been purchased from the open market and the North Regional Bench held that as such sheets can come from two streams namely duty-paid or exempted from duty, it was for the Department to prove that the inputs are non-duty paid. The exemption from duty being conditional it cannot be held that the goods had been cleared free of duty, satisfying the conditions of the notification. It was, therefore, held that the concerned manufacturers were eligible for deemed Modvat Credit. This was followed by the South Regional Bench in so far as conditionally exempt inputs purchased from the open market were concerned e.g. (copper and aluminium - unwrought). The said facility was refused in respect of inputs which were unconditionally exempt copper and aluminium scrap. The fact that the inputs herein were internally generated in the same factory where they were subsequently used availing Modvat would distinguish the present case from other cases which were decided placing emphasis in the fact that inputs which were conditionally exempt had been purchased in the open market where both exempted and duty-paid products were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted the 10th February, 1986, is claimed on the ground that the inputs have been manufactured with the aid of electric furnace and documentary evidence exists to show that the reduced duty has been paid on such inputs. In such cases actual duty paid should be allowed. 8. In the present case it would be relevant to consider the application of condition (ii) quoted above. This condition provides that if the inputs are clearly recognisable as being non-duty paid or charged to nil rate of duty. 9. The above-said provision came up for detailed examination by the West Regional Bench of the Tribunal in the Arun Auto case, listed at Serial No. 4 of para 3 supra. It was held that the term charged to nil rate of duty applies to goods carrying a nil rate of duty under the Tariff and not any rate of duty but completely exempt therefrom by virtue of an exemption notification. Further and more importantly, it was held that goods which are exempt from duty by an exemption notification were not covered by the said condition because the said condition actually came to be incorporated therein only by means of Government of India Order No. 342/10/88-TRU, dated 20-5-1988 which was issued in super ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wer authorities herein that deemed credit facility seeks to provide exemption from the need to produce evidence of payment of duty but there is no exemption from the requirement of payment of duty. Taking note of the difficulty in producing the original duty payment documents for some products the deemed credit orders have been issued. But the effect of the same will not be to do away with the need to produce duty payment documents where the manufacturer is and in any case ought to be, in a position to submit it, particularly where the inputs in question arise in his own factory. If duty has been paid thereon, such evidence should be available with him only. In such type of cases, the deemed credit order will not be relevant and has no application. The extended type of situation brought about by the amendment specifically providing for goods completely exempt from duty is in the nature of a clarification only as the position with regard to goods completely exempt from duty is consistent with the provisions that were there before the said amendment. The revision is not inconsistent with the earlier existing provisions and is not in the nature of a fresh provision meant for applying ..... X X X X Extracts X X X X X X X X Extracts X X X X
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