Deemed MODVAT credit on market-purchased scrap upheld where the Department failed to prove the goods were clearly non-duty paid.

Deemed MODVAT credit was available on steel melting scrap purchased from the market where the goods were not clearly recognisable as non-duty paid. The statutory order under Rule 57G was treated as extending the credit facility to market trade conditions, and the exemption notification did not by itself shift the burden to the assessee or bar credit in every case. As no acceptable evidence showed that the scrap was clearly non-duty paid, the Department failed to discharge the burden on it, and the credit claim was upheld.

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Issues: Whether the respondent was entitled to deemed MODVAT credit on steel melting scrap purchased from the market, and whether the burden lay on the Department to prove that the scrap was clearly recognisable as non-duty paid.

Analysis: The statutory order issued under Rule 57G permitted deemed credit for market purchases unless the goods were clearly recognisable as non-duty paid. The exemption notification did not, by itself, shift the burden to the assessee or make the deemed credit unavailable in every case. The notification was treated as conditional, and the later statutory order was understood as extending the credit facility to trade realities where duty-paid documents for scrap in the market may not be available. In the absence of acceptable evidence showing that the scrap was clearly non-duty paid, the Department failed to discharge the burden cast on it.

Conclusion: The respondent was entitled to deemed MODVAT credit, and the Department's appeal was rejected.

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