Non-duty-paid scrap must be proved by Revenue before denying exemption on brass products made from market scrap.

Exemption under Notification No. 178/88 was available for brass sheets and circles manufactured from bazar scrap because the Revenue could not presume that the input scrap was non-duty paid. The non-duty-paid character of scrap had to be affirmatively proved, and mere assumption was insufficient. Scrap originating from worn or used metal articles was not denied exemption simply because its status as scrap duty payment was not shown, where duty may already have been borne in the article's earlier form. The impugned order was set aside and the appeal was allowed.

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Issues: Whether brass sheets and circles manufactured out of bazar scrap were entitled to the benefit of exemption Notification No. 178/88.

Analysis: The entitlement to exemption turned on whether the bazar scrap used as input could be treated as clearly recognisable as non-duty paid. The Revenue was required to establish, beyond mere assumption or presumption, that the scrap had been cleared without payment of duty. Scrap arising from prolonged use and wear, even if not duty paid as scrap, could not be treated as non-duty paid merely because duty may have been paid earlier on the original metal articles.

Conclusion: The exemption was available and the appellants were entitled to the benefit of the notification.

Final Conclusion: The impugned order was set aside and the appeal was allowed.

Ratio Decidendi: Non-duty paid character of input scrap cannot be presumed and must be proved by the Revenue; scrap purchased from the market is not denied exemption merely because its duty-paid status as scrap is unestablished if it may have suffered duty in its earlier form as metal articles.

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