1998 (1) TMI 260 - AT - Central Excise

Deemed Modvat credit allowed for old aluminum parts purchased from open market

The Tribunal ruled in favor of the appellants, holding that deemed Modvat credit can be availed on old and used broken aluminum machinery parts purchased ... Reference to High Court Issues:Whether deemed credit can be availed on old and used broken Aluminium - machinery parts purchased from open market and Kabaris in terms of Government of India letter issued under Rule 57G(2) or not.Analysis:The judgment involved four Reference Applications with a common issue regarding the availability of deemed Modvat credit on old and used broken aluminum machinery parts. The Tribunal referred to its earlier decisions in the case of M/s. Cinni Engineering Works and a Larger Bench. The Tribunal held that the issue of deemed credit was in favor of the appellants based on previous decisions. The Tribunal emphasized the importance of the burden of proof in cases of conditional exemption, stating that the burden lies on the manufacturer to establish eligibility for the benefit of the order issued under Rule 57G(2). The Tribunal highlighted the need for the manufacturer to take a definite stand and provide necessary documents to support their claim for exemption. The judgment elaborated on the exceptions to the exemption notification and the responsibilities of both the manufacturer and the Revenue in proving or contesting claims for deemed credit.The Applicant-Commissioner argued that old and broken parts are clearly recognizable as non-duty paid, shifting the burden of proof to the Department. On the other hand, the Respondent's counsel contended that it was a question of verifying facts to determine if the goods met the criteria of being non-duty paid as required by the Government order. The Tribunal considered the submissions and reviewed the relevant paragraphs of the impugned orders. It noted that the Tribunal had relied on its previous orders and that the Department had to verify the facts presented by the respondents. The Tribunal concluded that the question of whether the goods were clearly recognizable as duty paid was a matter of fact or law that could be determined through investigations and inquiries. As the issue was based on facts and evidence, the Tribunal ruled that no point of law was involved. Therefore, the Tribunal rejected all four Reference Applications as they were centered on factual determinations rather than legal issues.In summary, the judgment addressed the issue of deemed Modvat credit on old and used broken aluminum machinery parts, emphasizing the burden of proof on the manufacturer in cases of conditional exemption. The Tribunal's decision was based on previous rulings and the need for factual verification to determine the eligibility for deemed credit. The judgment clarified that the question of whether goods are clearly recognizable as duty paid is a matter of fact, not a point of law, leading to the rejection of the Reference Applications.