1997 (11) TMI 202 - AT - Central Excise

Tribunal nullifies Collector's order denying deemed credit on metal scrap, emphasizes burden of proof.

BENARA UDYOG PVT. LTD. Versus COLLECTOR OF CENTRAL EXCISE, KANPUR

BENARA UDYOG PVT. LTD. Versus COLLECTOR OF CENTRAL EXCISE, KANPUR - 1998 (98) E.L.T. 225 (Tribunal) Issues:- Denial of deemed credit on various types of metal scrap- Validity of departmental instruction dated 11-9-1990- Interpretation of Board's circular on deemed credit provisions- Burden of proof on department to show inputs were non-duty paid- Failure of authorities to address relevant aspects in the orderAnalysis:The appeal revolved around the denial of deemed credit on metal scrap by the appellants, who were manufacturers of Plain Shaft Bearings and Bimetal Strips. The appellants had been availing Modvat facility by filing proper declarations under Rule 57G and were receiving deemed credit on inputs like lead alloy, copper scrap, copper ingots wire bars, and aluminum scrap purchased from the open market. The department issued show cause notices proposing denial of deemed credit, alleging that the scrap was not generated due to conscious manufacturing activities and was non-duty paid. The appellants argued that the deemed credit was permissible as per Board's orders and that the departmental instruction dated 11-9-1990 was not enforceable as it was not circulated to them. They contended that goods purchased from the open market are deemed duty paid unless proven otherwise, and the burden of proof lies on the department to show inputs were non-duty paid.The Tribunal observed that excise duty is chargeable at the time of clearance from the factory and that goods purchased from the open market are deemed duty paid unless proven otherwise. The nature and type of scrap must be ascertained before applying any order or circular. The Tribunal noted that the order dated 12-7-1990 referred to virgin waste and scrap generated during the manufacture of articles and did not include bazar scrap. The Trade Notice No. 19/93 regarding bazar scrap was not binding on the Tribunal. The burden of proof to show inputs were non-duty paid rests on the department, and the authorities failed to address relevant aspects in the order.The Tribunal held that the order of the Collector (Appeals) was null and void as it did not address the contentions raised by the appellants. The matter was remanded to the Collector (Appeals) for de novo consideration with directions to pass a speaking order after giving the appellants an opportunity to be heard. The Tribunal emphasized the need for a thorough examination of all relevant aspects in accordance with the law before making a decision on the deemed credit issue.