Burden of proof in deemed modvat credit cases rests on Revenue to prove exclusion from benefit

In a claim for deemed modvat credit, the Revenue had the burden of proving that the inputs fell within the scheme's exclusion clauses and were not duty paid. The deemed credit order treated covered goods as having suffered duty unless the department established, with cogent material, that they were nil-rated, non-duty paid, or otherwise excluded. Relying on departmental instructions and the settled rule that the party asserting denial of a benefit must prove the facts supporting that denial, the Court held that the absence of such evidence barred disallowance of credit. The assessee was therefore entitled to deemed modvat credit.

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Issues: Whether, in a claim for deemed modvat credit, the burden of proving that the goods were duty paid lay on the department or on the assessee.

Analysis: The deemed credit scheme under the Government of India's order treated goods purchased from outside and lying in stock on or after the relevant date, when used in the manufacture of specified final products, as having suffered duty at the specified rate, subject to stated exclusion clauses. Where the department sought to deny the benefit by invoking those exclusions, it had to establish by cogent material that the goods fell within an exclusion. The Court also relied on departmental instructions and circulars, and on the settled principle that the party asserting the facts giving rise to denial of a benefit carries the burden of proof. The absence of evidence showing that the inputs were non-duty paid, nil-rated, or otherwise covered by the exclusion clauses meant the credit could not be denied.

Conclusion: The burden of proof was on the Revenue, not on the assessee; the assessee was entitled to deemed modvat credit.

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