1994 (7) TMI 179 - AT - Central Excise

Waiver of Pre-Deposit & Stay of Recovery in Duty & Penalty: Modvat Credit, Burden of Proof, Financial Hardship

The case involved issues of waiver of pre-deposit and stay of recovery of duty and penalty, availability of deemed Modvat Credit on aluminum scrap, burden ... Stay/Dispensation of pre-deposit Issues Involved:1. Waiver of pre-deposit and stay of recovery of duty and penalty.2. Availability of deemed Modvat Credit on waste and scrap of aluminium purchased from the open market.3. Burden of proof regarding the non-duty paid nature of goods.4. Financial hardship as a ground for waiver.Detailed Analysis:1. Waiver of Pre-deposit and Stay of Recovery of Duty and Penalty:The applicants sought a waiver of pre-deposit and stay of the amounts detailed in the order dated 1-8-1993 by the Collector of Central Excise (Appeals), Allahabad. The amounts involved included duties ranging from Rs. 9,725.99 to Rs. 2,58,472/- and penalties from Nil to Rs. 20,000/- for various periods in 1992 and 1993.2. Availability of Deemed Modvat Credit on Waste and Scrap of Aluminium:The primary issue was whether the applicants, who are manufacturers of electric fans, could avail deemed Modvat Credit on aluminium scrap purchased from the open market. The Assistant Collector and the Collector (Appeals) held that deemed Modvat credit was not available as the scrap was mainly composed of used broken parts of aluminium utensils, machinery, and motor parts, which were not obtained through a conscious manufacturing process. Additionally, aluminium utensils were exempt from duty under Notifications No. 172/84 and No. 182/84, making the scrap ineligible for deemed credit as clarified in the Allahabad Collectorate Trade Notice No. 27/92 dated 18-5-1992.The applicants argued that goods purchased from the open market are deemed to be dutiable, and the burden of proving the non-duty paid nature of the goods lies with the Revenue. They cited the Tribunal's consistent view and previous decisions like Durrang Steels v. Collector of Central Excise and M/s. Alcobex Metals Ltd. v. Collector of Central Excise, Jaipur, to support their claim for relief.3. Burden of Proof Regarding the Non-duty Paid Nature of Goods:The Vice President opined that goods purchased from the open market are presumed to be dutiable, but this presumption is rebuttable. The burden of proving the non-duty paid nature initially lies with the Revenue. Once the Revenue discharges this burden, the onus shifts to the other side. In this case, the Department argued that the scrap included aluminium utensils exempt from duty, supported by Trade Notice No. 27/92 of Allahabad Collectorate. The appellants failed to show evidence to the contrary, making the input recognisable as non-duty paid.4. Financial Hardship as a Ground for Waiver:The Vice President noted that the appellants did not plead financial hardship. Considering the totality of circumstances, he proposed waiving the pre-deposit of penalty only and required the appellants to deposit the duty amount within eight weeks, failing which their appeal would be dismissed.Majority Opinion and Final Order:The matter was referred to a third member due to a difference of opinion between the Member (Judicial) and the Vice President. The third member, agreeing with the Member (Judicial), concluded that the goods purchased from the open market are deemed to be duty paid, and Modvat credit is permissible. The requirement of pre-deposit of duty and penalty was waived, and the recovery was stayed pending the appeals.Final Order:In view of the majority opinion, the requirement of pre-deposit of duty and penalty was waived, and their recovery was stayed during the pendency of the appeals.