Duty-paid railway scrap exemption turns on Revenue's burden to prove inputs were non-duty paid before denying relief.

Exemption under Notification No. 202/88 was available where railway scrap used as input was duty paid, and the duty-paid character of such purchased scrap was to be presumed unless the Revenue proved otherwise. The Tribunal applied the Supreme Court view that old and used railway material can fall within the notification, and followed the Allahabad High Court principle that the burden rests on the Revenue to show that the inputs were non-duty paid. As the Revenue failed to establish that the scrap bought from the railways was non-duty paid, the contrary assumption in the impugned order was incorrect and the exemption was upheld.

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Issues: Whether the assessee was entitled to the benefit of Notification No. 202/88 dated 20-5-88 on the footing that the railway scrap used as inputs was duty paid, and whether the Revenue had discharged the burden of proving that the inputs were non-duty paid.

Analysis: The dispute turned on the character of the railway scrap purchased and used in the manufacture of rods and bars. The Tribunal followed the Supreme Court's view that old and used railway material used as inputs could fall within the description covered by the exemption notification, and the Allahabad High Court's view that duty-paid nature of railway scrap is to be presumed unless the Revenue proves otherwise. In the present case, the Revenue had not established that the scrap purchased from the railways was non-duty paid, while the impugned order had proceeded on an assumption to that effect. That approach was inconsistent with the governing legal position.

Conclusion: The assessee was entitled to the exemption, and the Revenue had failed to disprove the duty-paid character of the inputs.

Ratio Decidendi: Where exemption depends on inputs being duty paid, the burden lies on the Revenue to prove that railway scrap or similar purchased inputs are non-duty paid before denying the benefit of the notification.

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