Burden on Revenue to prove non-duty paid inputs before denying exemption under the excise notification

In disputes over exemption under Notification No. 202/88-C.E., where the assessee states that inputs were purchased from the open market, the burden remains on the Revenue to prove that those inputs were non-duty paid. A mere statement without a clear admission that manufacture was from non-duty paid inputs is insufficient to deny the exemption or sustain duty demand and penalty. On the facts noted, the Revenue produced no evidence to discharge that burden, so the exemption benefit could not be denied and the adverse demand and penalty were set aside.

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Issues: Whether the Revenue had discharged the burden of proving that the inputs used in manufacture were non-duty paid so as to deny the benefit of Notification No. 202/88-C.E. dated 20.05.1988 and sustain the duty demand and penalty.

Analysis: The appellants manufactured M.S. Flats and M.S. Bars and claimed the benefit of the notification on the basis that the inputs were purchased from the open market. The statement relied upon by the Revenue did not contain any clear admission that the goods were manufactured from non-duty paid M.S. ingots. Where the assessee's case is that inputs were procured from the open market, the onus remains on the Revenue to establish that such inputs were non-duty paid. No evidence was produced by the Revenue to discharge that burden.

Conclusion: The denial of the notification benefit was not sustainable. The duty demand and penalty were set aside and the appeal was allowed in favour of the assessee.

Final Conclusion: The order of the lower authority failed for want of proof by the Revenue, and the assessee retained the benefit of the exemption notification.

Ratio Decidendi: In a dispute over exemption based on duty-paid inputs, the burden lies on the Revenue to prove that the inputs were non-duty paid when the assessee asserts open-market purchase and no contrary evidence is produced.

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