Deemed credit on inputs survives where the Revenue fails to prove non-duty-paid status or ineligibility
Deemed credit on inputs was considered in relation to goods described as non-duty paid or chargeable to nil rate of duty. The order clarified that the expression "charged to nil rate of duty" has a special meaning and does not, by itself, exclude inputs that are wholly exempt from duty. It also noted that the manufacturer must first state the character of the inputs, after which the Revenue may accept or contest that position. On the facts, the assessees said the goods were bought from the open market, and the Revenue did not produce sufficient evidence to show that the inputs were ineligible for credit; deemed credit was therefore sustained.
Issues: Whether deemed credit on inputs was admissible where the goods were stated to be non-duty paid or charged to nil rate of duty, and whether the Revenue had discharged the burden of proving that such inputs were not eligible for credit.
Analysis: The Order dated 07.04.1986 on deemed credit was construed in the light of prior Tribunal and High Court decisions. The expression "charged to nil rate of duty" was held to have a special connotation and did not, by itself, exclude inputs that were wholly exempt from duty. The decision also proceeded on the principle that the manufacturer must first take a definite stand regarding the character of the inputs, and once such a stand is taken, the Revenue may accept or contest it. On the facts, the respondents had stated that the goods were purchased from the open market, and there was no sufficient evidence to establish that the inputs were non-duty paid so as to deny deemed credit.
Conclusion: Deemed credit could not be denied on the facts, and the Revenue's challenge failed.
Final Conclusion: The order allowing deemed credit was sustained and the Revenue appeal was rejected.
Ratio Decidendi: Where an assessee asserts the character of the inputs and the Revenue does not adduce adequate evidence to disprove duty-paid status, deemed credit cannot be denied merely because the goods are alleged to be exempt or chargeable at nil rate.
TaxTMI 
AI Drafter ✕
TaxTMI 
