Customs, Excise and Gold Tribunal - Delhi
Upper India Steel Mfg. And Engg. Co. Ltd. vs C.C.E. on 11 September, 1997
Equivalent citations: 1997(96)ELT306(TRI-DEL)
ORDER G.R. Sharma, Member (T)
1. By the captioned appeal, the appellants have agitated against the findings of the Collector holding that the initial burden was on the appellants to prove that the inputs on which the deemed Modvat credit has been taken was utilised by them are recognisable as non-duty paid or charged to nil rate of duty which they have failed to discharge. The Collector, therefore, directed the appellants to reverse the amount of Rs. 54,97,231.84 and also imposed a penalty of Rs. 10 lac on them.
2. The facts of the case are that the appellants are engaged in the manufacture of steel ingots and iron and steel rolled products. They were purchasing scrap of iron and steel from the market. The appellants in pursuance to the Government of India Order No. B/22/86-C.E., dated 7-4-1986 took the deemed Modvat credit on iron and steel scrap purchased from the market. The department alleged that the appellants have not produced any evidence that the duty was paid on the scrap and, therefore, they were not entitled to claim deemed Modvat credit on the scrap. The appellants submitted that they had produced the bills for verification and that it was not necessary for them to prove that the duty was paid on the scrap. It was contended by them that if they had the duty paying documents then there was no necessity of claiming deemed Modvat credit. The Collector, however, based his findings on the decision of the Hon'ble Punjab and Haryana High Court wherein it was held that "I am of the considered view that there is no general rule that the burden is on the department to show that certain input is recognisable as being non-duty paid or charge to nil rate of duty. In my view the initial burden is on the manufacturer claiming deemed credit to take a definite stand with regard to certain inputs. It is then open to the department to accept that claim or contest the same" and held as indicated above.
3. Shri P.S. Bedi, learned Consultant appearing for the appellants submits that Rule 57G inter alia stipulates that the goods will be clearly recognisable. He submits that the only goods lying in a factory, Customs area or a warehouse will be goods clearly recognisable as non-duty paid. He submits that in spite of the fact that all the documents were being produced to the department from time to time, the department were only looking for whether the documents indicated that the duty was paid or not. He submits that there are a number of judgments of this Tribunal on identical facts holding that the onus was on the department to prove that the goods were clearly recognisable as non-duty paid or charged to nil rate of duty. In support of this contention, he cites and relies upon the decision of this Tribunal in the case of Cinni Engg. Works and Ors. [1997 (19) RLT 297], in the case of M/s. Antartic Industries Ltd. and Ors. (Final Order No. A/102/97-NB, dated 8-2-1997) and in the case of M/s. Nahar International Limited (Final Order No. A/628/97-NB, dated 26-5-1997). The learned Consultant submits that the appellants had at the,adjudication stage clearly indicated that all the challans in respect of the goods were available and could be verified. He submits that having regard to the case law, their case is fully covered by the decisions of this Tribunal and, therefore prays that the appeal may be allowed.
4. Countering the arguments of the appellants, Shri P.K. Jain, learned SDR submits that the appellants had not produced any evidence to show that the duty was paid on the goods purchased from the market. He submits that the appellants were making a consolidated entry as is indicated in the Order-in-Original and that this indicated that the appellants were not given separate bills and challans. He reiterates the findings of the lower authorities.
5. Heard the submissions of both sides. The short point for determination in this case is whether the purchases were covered by bills /challans and whether these bills/challans were produced before the lower authorities. We find that the Collector in the impugned order had held as under :-
"In my view, in the light of above observation of the Punjab and Haryana High Court, a manufacturer is required to prove that the goods purchased by him have paid the duty when he is working under the instructions dated 7th April, 1986 (Para 2). As per para 2 of Ministry's instructions dated 7-4-1986, the Noticees are required to discharge their liability as to whether the inputs are clearly recognisable as being non-duty paid or charged to nil rate of duty which they have failed to do despite the fact that the Range Superintendent, Central Excise Range-Ill, Ludhiana vide letter C. No. CE-20/Modvat/R. 111/86/595-603, dated 9-9-1986 called for the original purchase bills so as to verify the admissibility of the credit so taken by the Noticees and no proof of payment of duty on the inputs - waste and scrap of iron and steel was produced by the Noticees. It was also observed by the Range Officer that the Noticees have not properly indicated scrap of iron and steel except making a consolidated entry regarding the quantity received for the whole month. Further, I also find that despite clear cut directions given by the Range Superintendent vide his letter C. No. CE-20/Modvat/R. 111/86/573-80, dated 3-9-1986 that the facility of the deemed credit on waste and scrap of iron and steel has since been withdrawn and directed the Noticees not to take/utilise the deemed credit besides not utilising the balance of the said credit and debit the duty in PLA but the Noticees continued to utilise the same towards payment of duty on the finished products. I have also given all the considerations to the judgment of the Hon'ble CEGAT cited by the learned Counsel and with respectful difference to the same, I rely upon the ratio of judgment of single judge Bench which was further upheld by the double judge Bench of the Hon'ble Punjab and Haryana High Court in the case of Noticees and put the initial burden on the noticees to prove that the inputs on which the said Modvat credit has been taken/utilised by them are non-recognisable as non-duty paid or charged to nil rate of duty which they have failed to discharge."
6. We find that the appellants have taken a stand. We have seen the findings of the Collector in the impugned order. Our attention has also been drawn to the submissions made by the appellants before the Collector. One of the submissions was that "It is accordingly requested that field formations may be directed to verify the quantity of "iron scrap" as well as of "steel scrap" received by the unit from the record before any decision is taken on this show cause notice. Further the appellants contended that the quantity of scrap iron and quantity of scrap of steel is clearly verifiable from the invoices received by the unit wherein the supplier has indicated Iron Scrap or Steel Scrap. This clearly shows that the appellants had challans/bills and had taken a stand that they have taken deemed Modvat credit on the strength of these challans/bills and they offered them to verification, if authorities so desire. We find that identical issue came up in the decision cited and relied upon by the appellants and the appellants in those cases were allowed deemed Modvat credit because the assessee had offerred verification of challans/bills on the strengh of which deemed Modvat credit was taken. Having regard to the facts of the case and the case law cited and relied upon by the appellants, we hold that the Modvat credit was admissible to the appellants. In the result the appeal is allowed with consequential relief in accordance with law.