Exemption for re-rollable scrap preserved where open-market purchase was not proven non-duty-paid by the department.

Re-rollable scrap purchased from the open market and used in manufacturing M.S. rods was treated as eligible for exemption under Notifications 90/88-C.E. and 202/88-C.E. The Tribunal relied on the Ministry's Circular No. 27/89 and the deeming fiction in Notification 202/88-C.E., under which domestic stocks of inputs are treated as duty-paid unless clearly identifiable as non-duty-paid or nil-rated. It also noted that Heading 7204 of the Central Excise Tariff, by itself, does not justify denial of exemption for re-rollable scrap. In the absence of tangible evidence from the department that the scrap was non-duty-paid, exemption could not be denied.

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Issues: Whether re-rollable scrap purchased from the open market and used in the manufacture of M.S. rods was eligible for exemption under Notification Nos. 90/88-C.E. and 202/88-C.E.

Analysis: The exemption was considered in the light of the Ministry's Circular No. 27/89 dated 21-9-89 and the explanatory deeming provision in Notification No. 202/88-C.E., which treated stocks of inputs in the country as duty-paid except where clearly recognizable as non-duty paid or nil-rated. The Tribunal also accepted the view that Heading 7204 of the Central Excise Tariff Act, 1985 covered only scrap generally used for re-melting and would not, by itself, justify denial of exemption to re-rollable scrap. No tangible evidence was produced by the department to show that the scrap purchased from the market and used in manufacture was non-duty paid.

Conclusion: The re-rollable scrap was eligible for the exemption, and the Revenue's challenge failed.

Final Conclusion: The order granting exemption was sustained, and the Revenue appeal was rejected.

Ratio Decidendi: Where re-rollable scrap is purchased from the open market and the department fails to prove that it was non-duty paid, the benefit of the exemption notifications cannot be denied merely by classifying the material under Heading 7204.

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