1993 (9) TMI 229 - AT - Central Excise

Tribunal allows Modvat credit on inputs; burden on Department to prove non-payment of duty.

OMEGA ALLOYS CASTINGS PVT. LTD. Versus COLLECTOR OF C. EXCISE, INDORE

The Tribunal held that the appellants were entitled to Modvat credit on inputs covered by the deemed credit order of the Government of India dated ... Modvat - Deemed Credit Issues Involved:1. Admissibility of Modvat credit on various inputs.2. Requirement of Assistant Collector's permission under Rule 57H.3. Availability of deemed credit facility and proof of payment of excise duty.4. Application of time bar under Section 11A of the Central Excises & Salt Act.5. Determination of the correct amount/demand.Detailed Analysis:1. Admissibility of Modvat Credit on Various Inputs:The appellants challenged the disallowance of deemed Modvat credit on steel scrap, ferro-alloys, etc., taken during March/April 1986 to December 1986. They declared inputs such as cast iron duplex, ferro manganese, ferro silicon, M.S. Scrap, and Iron scrap for availing Modvat credit. The Superintendent of Central Excise required the appellants to submit bills and documents evidencing payment of excise duty on these inputs. The appellants argued that the credit on steel scrap was taken on a deemed basis as per the Government of India order dated 7-4-1986, which was available before the facility was withdrawn on 29-8-1986. The Tribunal held that goods exempt from payment of duty under an exemption notification cannot be considered as non-duty paid or charged to nil rate of duty. Therefore, steel scrap was entitled to the benefit of deemed credit in terms of the Government of India order dated 7-4-1986.2. Requirement of Assistant Collector's Permission under Rule 57H:The appellants contended that the credit was taken based on deemed credit orders and that they had filed the necessary declaration and documents. The Assistant Collector disallowed the entire Modvat credit, and the Collector (Appeals) rejected the appeal solely on the ground that prior permission of the Assistant Collector was not obtained. The Tribunal found that the appellants had furnished the position of the inputs and requested Modvat credit, and it was up to the Assistant Collector to grant the required permission. If no action was taken by the Assistant Collector for a long period, the appellants were entitled to presume the permission was granted. The learned Collector (Appeals) erred in rejecting the appeal merely on this ground.3. Availability of Deemed Credit Facility and Proof of Payment of Excise Duty:The appellants claimed deemed credit on inputs purchased from the open market and goods received on payment of central excise duty from Bharat Heavy Electricals. The Tribunal held that goods purchased from the open market are deemed to be duty paid unless proved otherwise. Certificates issued by Public Sector Undertakings could be considered in lieu of GP-1. The Department had the burden of proving that no duty had been paid on these goods.4. Application of Time Bar under Section 11A of the Central Excises & Salt Act:The appellants argued that the show cause notice for recovery beyond 9-8-1986 was time-barred as it did not allege any mis-statement or suppression justifying the extended period of limitation. The Tribunal held that the time limit prescribed under Section 11A applies to the recovery of wrong credit taken in terms of Rule 57-I. Since the RT 12 returns were assessed provisionally, the question of time bar did not arise.5. Determination of the Correct Amount/Demand:The Tribunal noted that no specific findings were recorded by the lower authorities regarding the correct amount/demand. The learned Collector (Appeals) erred in dealing with only one aspect of the case and not considering all relevant aspects. The matter was remanded back to the Collector (Appeals) for de novo consideration in accordance with the law, ensuring that all relevant aspects were duly considered and positive findings recorded.Separate Judgments:The Vice President dissented, suggesting remanding the matter for de novo consideration. The third member, agreeing with the Member (Judicial), concluded that the appellants were entitled to Modvat credit on the inputs covered by the deemed credit order of the Government of India dated 7-4-1986. The appeal was allowed with consequential relief if any due.