Deemed Modvat credit and burden of proof: presumption of duty-paid inputs applied where Revenue failed to rebut it.

Deemed Modvat credit was admissible for rolling and re-rolling materials not falling within the excluded headings under the deemed credit scheme. The order created a presumption that outside purchases in stock on the relevant date had suffered the prescribed duty, subject to stated exceptions, and Revenue led no evidence to show that any exception applied or that the inputs were non-duty-paid. The burden to disprove duty-paid character could not therefore be shifted to the manufacturer, and the disallowance of credit was unsustainable.

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Issues: Whether deemed Modvat credit was admissible on rolling and re-rolling materials received by the manufacturer under the Government order governing deemed credit, and whether the burden to disprove the duty-paid character of the inputs lay on the Department.

Analysis: The inputs shown in the invoices were heavy square rolling material and re-rolling material, and they did not fall within the excluded headings 7201 to 7205. The relevant order created a presumption that goods purchased from outside and lying in stock on the relevant date were deemed to have suffered the specified duty, subject only to stated exceptions. The goods were received through dealers, and no evidence was led by Revenue to show that any exception applied, that the goods were recognisably non-duty-paid, or that they had been cleared under exemption. In these circumstances, the evidentiary burden to establish non-duty-paid character could not be shifted to the manufacturer.

Conclusion: Deemed credit was admissible and the disallowance was unsustainable; the issue is decided in favour of the assessee.

Final Conclusion: The appeals succeeded and the denial of deemed Modvat credit was set aside because the inputs were not shown to fall within the excluded categories and Revenue failed to rebut the presumption of duty-paid character.

Ratio Decidendi: Where inputs are not covered by the excluded categories under the deemed credit scheme, a presumption of duty-paid character applies unless Revenue proves that a stated exception is attracted; the burden to disprove duty payment cannot be placed on the assessee without such evidence.

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