Burden of proof for denying deemed Modvat credit on scrap rests on Revenue, not on the exemption notification alone.

Deemed Modvat credit on lead scrap cannot be denied merely because the goods were covered by an exemption notification; the notification alone does not prove that the scrap was non-duty paid. The Revenue must discharge the burden of showing that the conditions for denial of the benefit are satisfied. Where the scrap was bought from the open market and the record did not identify the manufacturer or establish non-payment of duty, the material was insufficient to disallow credit. A remand to test compliance with Notification No. 186/85 at a later stage would improperly introduce a fresh case against the assessee.

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Issues: Whether deemed Modvat credit on lead scrap could be denied on the premise that the scrap was non-duty paid and whether the Revenue had discharged the burden of proving ineligibility under the conditional exemption notification.

Analysis: The order notes that a mere exemption notification does not establish that all goods covered by it are non-duty paid. When the matter reaches appeal, the Revenue must satisfy the appellate forum that the conditions for denial of the benefit are met. On the material available, the scrap was purchased from the open market and the record did not establish the identity of the manufacturer or show that duty had not been paid. In these circumstances, a remand to investigate satisfaction of the conditions of Notification No. 186/85 would amount to introducing a fresh case against the assessee at a later stage.

Conclusion: The Revenue's challenge failed and the order allowing deemed Modvat credit was left undisturbed.

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