MODVAT credit on scrap cannot be denied merely because it was bought from the open market without proof it was non-duty paid.

Cross objections that merely commented on the grounds of appeal and did not independently survive as a tenable challenge were held not maintainable and dismissed. On MODVAT credit for scrap bought from the open market, the Department had to prove that the inputs were in fact non-duty paid scrap; absent evidence identifying the scrap as a non-duty paid category and without proof or verification of the lots received, credit could not be denied. Mere purchase from the open market was insufficient to disallow the credit, and the Revenue's appeals failed.

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Issues: (i) Whether the cross objection was maintainable; and (ii) whether MODVAT credit on scrap purchased from the open market could be denied on the ground that it was non-duty paid scrap.

Issue (i): Whether the cross objection was maintainable.

Analysis: The cross objection was only in the nature of comments on the grounds urged in the appeal and did not independently survive as a tenable cross objection.

Conclusion: The cross objection was not maintainable and was dismissed.

Issue (ii): Whether MODVAT credit on scrap purchased from the open market could be denied on the ground that it was non-duty paid scrap.

Analysis: The scrap used by the respondents was not shown by evidence to be broken tins or any other category necessarily to be treated as non-duty paid. The Department did not establish the actual nature of the scrap or discharge the burden of proving that the inputs were non-duty paid. Mere purchase from the open market was insufficient to deny credit in the absence of proof and verification of the lots received.

Conclusion: MODVAT credit could not be denied, and the Revenue's appeals failed.

Final Conclusion: The decision affirms that, for scrap inputs claimed under the MODVAT scheme, denial of credit requires proof by the Department that the goods were non-duty paid; in the absence of such proof, the assessee is entitled to the credit.

Ratio Decidendi: The burden lies on the Department to prove that inputs on which MODVAT credit is claimed are non-duty paid, and credit cannot be denied merely because the goods were purchased from the open market.

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