Presumed duty payment for market-purchased inputs can support exemption despite missing duty documents

Duty-paid status under an exemption notification may be inferred for raw materials purchased from steel manufacturers in the market, because excise duty is ordinarily levied on the manufacturer and removal follows payment of duty. The stated approach treats such purchases as carrying a presumption of duty payment unless the department proves otherwise. On that reasoning, the absence of duty-paying documents for every quantity does not by itself defeat the exemption, since the buyer is not expected to verify the manufacturer's tax compliance in ordinary market transactions. The department must therefore bring contrary evidence before denying the notification benefit.

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Issues: Whether raw materials purchased by the assessee from steel manufacturers could be treated as duty-paid for the purpose of availing exemption under Notification No. 206/63 dated 30-11-1963, even though duty-paying documents were not produced for all quantities.

Analysis: The exemption notification was applied in the light of the excise scheme under which duty is primarily levied on the manufacturer and goods are ordinarily removed only after duty payment. The decision treated market purchases from steel manufacturers as carrying a presumption of duty payment, unless the department proved otherwise. The authorities and the Tribunal relied on the settled view that the words "has been paid" in such notifications do not necessarily mean actual proof of payment by the buyer, and that a purchaser cannot ordinarily be expected to verify the manufacturer's duty compliance. On that footing, the department's denial of exemption merely for want of duty-paying documents was not sustained.

Conclusion: The raw materials received by the assessee from steel manufacturers were to be treated as duty paid in the absence of contrary proof by the department, and the exemption was allowable.

Final Conclusion: The appeal succeeded and the duty demand was set aside because the assessee was entitled to the notification benefit on the footing of presumed duty payment for market-purchased inputs.

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