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AI Drafter - (New and Powerful) ✕ Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter.
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Issues: Whether deemed Modvat credit under Rule 57G(2) of the Central Excise Rules was admissible on aluminium scrap and copper scrap purchased from the open market when the scrap was found to be wear and tear scrap comprising old and used articles.
Analysis: The adjudicating authority had recorded a categorical finding that the scrap was wear and tear scrap consisting mainly of old and used articles, and no evidence was produced to rebut that finding. Scrap not generated in a manufacturing process is not chargeable to excise duty and is therefore clearly recognisable as non-duty paid. Once the Department established the nature of the goods, the burden shifted to the assessee to show that the goods were not clearly recognisable as non-duty paid. The authorities relied on by the assessee were held to be distinguishable on facts and did not govern the present case.
Conclusion: Deemed Modvat credit was not admissible on the scrap in question, and the assessee's claim failed.
Final Conclusion: The appeals were rejected after holding that the open-market scrap was clearly recognisable as non-duty paid and outside the scope of the deemed credit facility.
Ratio Decidendi: Deemed credit under Rule 57G(2) is unavailable for goods that are clearly recognisable as non-duty paid, including discarded or wear and tear scrap not arising from a manufacturing process, and once the Department establishes that nature of the goods, the burden shifts to the assessee to disprove that character.
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