Deemed MODVAT credit on open-market scrap upheld where the Department failed to prove the inputs were non-duty paid.

Goods purchased from the open market were treated as deemed duty paid for MODVAT credit under the Government of India letter dated 7-4-1986 issued under Rule 57G(2) of the Central Excise Rules, 1944. The Tribunal followed its consistent view that duty-paying documents were not required for such open-market scrap, and held that the Department had to prove the inputs were non-duty paid. As no such evidence was produced, deemed MODVAT credit on the waste iron and steel scrap was available to the assessees.

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Issues: Whether the appellants were entitled to deemed MODVAT credit on waste iron and steel scrap purchased from the open market without production of duty-paying documents.

Analysis: The Tribunal followed its earlier consistent view that goods purchased in the open market are to be treated as deemed duty paid for the purpose of MODVAT credit under the Government of India letter dated 7-4-1986 issued in terms of Rule 57G(2) of the Central Excise Rules, 1944. It also noted that the Department had not adduced evidence to show that the inputs were in fact non-duty paid, and that the burden to establish such non-duty-paid character lay on the Department.

Conclusion: The appellants were entitled to take deemed MODVAT credit on the disputed inputs.

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