Deemed Modvat credit on aluminium scrap and burden of proving suppression require fresh adjudication on record and trade notice.

Deemed Modvat credit on aluminium waste and scrap could not be rejected without considering the relevant Trade Notice and the duty-paid character of the inputs. The record indicated that the department had not established that the goods were non-duty-paid, and the duty-paid nature of scrap in the hands of the transport company also required consideration. On limitation and suppression, the burden lay on the department to prove wilful suppression, misdeclaration, or clandestine removal with intent to evade duty; the assessee was not required to disprove these matters. The credit issue and limitation question were remanded for fresh adjudication after hearing the assessee.

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Issues: (i) Whether deemed Modvat credit on aluminium waste and scrap was to be denied without considering the relevant Trade Notice and the duty-paid nature of the inputs; (ii) whether the question of limitation and allegation of suppression required fresh examination, and on whom the burden of proof lay.

Issue (i): Whether deemed Modvat credit on aluminium waste and scrap was to be denied without considering the relevant Trade Notice and the duty-paid nature of the inputs

Analysis: The Trade Notice relied upon was material to the controversy and had not been considered by the adjudicating authority. The inputs were stated to have been procured from market and also from Government or semi-Government bodies, and the department had not established that the goods were non-duty-paid. The record also showed that the authorities had not taken note of the duty-paid character of the scrap in the hands of the transport company.

Conclusion: The issue had to be reconsidered by the adjudicating authority in a fresh adjudication.

Issue (ii): Whether the question of limitation and allegation of suppression required fresh examination, and on whom the burden of proof lay

Analysis: The burden was not on the assessee to prove the duty-paying nature of the inputs or to establish absence of suppression. It was for the department to show wilful suppression, wilful mis-declaration, or clandestine removal with intent to evade duty. The assessee's claim that the goods had been verified and that RT 12 returns had been filed and assessed required fresh consideration.

Conclusion: The limitation issue and the allegation of suppression were remanded for fresh examination.

Final Conclusion: The appeals succeeded to the extent that the matters were sent back for de novo adjudication after hearing the appellants, with the issues of credit entitlement and limitation to be determined afresh.

Ratio Decidendi: Where relevant material bearing on deemed credit is not considered and the department has not discharged the burden of proving non-duty-paid inputs or suppression, the matter must be remanded for fresh adjudication on merits and limitation.

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