Deemed credit on open-market inputs requires departmental proof to deny duty-paid status, with remand for fresh speaking order.

Open-market inputs used for Modvat or deemed credit were treated as duty paid unless the department proved otherwise, so the burden of rebuttal lay on the department. The analysis also stated that Board instructions issued under statutory authority were binding on subordinate authorities, but the deemed credit order was not to be applied automatically to bazar scrap without examining its nature and source. Because the appellate authority failed to deal with the material submissions and decisive issues, the order was set aside and the matter remanded for fresh, reasoned adjudication.

---

---

Issues: (i) Whether goods purchased from the open market and used as inputs for Modvat/deemed credit are to be treated as duty paid unless the department proves otherwise, and whether the Board's circulars/orders governing deemed credit were binding on subordinate authorities; (ii) Whether the order of the appellate authority, having failed to deal with the relevant contentions, could be sustained or required to be set aside and remanded for fresh decision.

Issue (i): Whether goods purchased from the open market and used as inputs for Modvat/deemed credit are to be treated as duty paid unless the department proves otherwise, and whether the Board's circulars/orders governing deemed credit were binding on subordinate authorities.

Analysis: The inputs in question were purchased from the open market, and the settled position applied was that such goods are to be treated as duty paid unless the contrary is established. The burden to prove non-duty-paid character rested on the department. The Tribunal also noted that instructions or orders issued by the Board in exercise of statutory powers under Section 37B are binding on subordinate authorities. On the facts, the deemed credit order was understood as applying to excisable virgin waste and scrap generated during manufacture, and not as extending automatically to bazar scrap without examining the nature and source of the material.

Conclusion: The department could not deny the benefit merely on assumption, and the Board's binding instructions had to be followed in the proper factual context.

Issue (ii): Whether the order of the appellate authority, having failed to deal with the relevant contentions, could be sustained or required to be set aside and remanded for fresh decision.

Analysis: The appellate order did not address the material submissions or record findings on the decisive aspects of the dispute. The Tribunal treated this omission as a serious infirmity because the authority was required to examine the nature of the scrap, the applicability of the deemed credit orders, and the evidentiary burden before denying relief. In view of the incomplete reasoning, a fresh adjudication with a speaking order was necessary.

Conclusion: The order was set aside and the matter was remanded for de novo consideration after hearing the appellant.

Final Conclusion: The dispute was not finally decided on merits, and the matter was returned to the appellate authority for a fresh, reasoned determination in accordance with law.

Ratio Decidendi: Open-market inputs are presumptively duty paid unless the department discharges the burden of proving otherwise, and binding departmental circulars issued under statutory authority must be followed by subordinate officers; a non-speaking order failing to address the material issues cannot be sustained.

---