ORDER

S.K. Bhatnagar, Member (T)

1. These are departmental appeals filed against the orders of Collector of Central Excise, New Delhi.

2. As common issues are involved, all the five appeals were heard together for the sake of convenience.

3. The learned DR submitted that the basic legal issue involved in all these cases is whether in case of inputs which have been wholly exempted from duty albeit conditionally the benefit of modvat scheme was available to the respondents.

4. It was his submission that being wholly exempt from duty under various exemption notifications such as Notification Nos. 208/83, 152/86 and 178/84 they become clearly recognisable as being non duty paid, and in fact no duty is paid by the manufacturers on these goods at the time of their clearance from the factories. Hence the onus 1 gets shifted to the assessees, desirous of claiming modvat credit, to prove that excise duty had in fact been paid on these inputs.

5. As such, a proof of payment of duty was required to be adduced to avail the benefit of the provisions regarding deemed credit.

6. In all these cases duty paying documents were not produced, and in view of their exempted character the fact that they must have been cleared at nil rate of duty or without payment of duty was apparent. Hence the benefit of Government of India's Order D-22/5/26-TRU dated 7-4-1986 read with proviso to Section 57(G)(2) was not admissible, as per proviso II to Part 2 of the said order.

7. The learned Collector (Appeals) has therefore erred in allowing the benefit of deemed credit to the respondents.

8. The learned SDR also submitted that in this connection he would like to draw attention to an order of the South Regional Bench in the case of Rapsri Industries reported in MANU/CC/0039/1989 : 1989 (43) ELT 577. According to these orders in case the goods are conditionally exempted then non-duty paid character of such goods cannot be presumed but is required to be established before deemed credit is allowed.

9. It is, therefore, prayed that the orders of the learned Collector (Appeals) may be set aside.

10. The learned counsels led by senior Counsel Shri Kohli submitted that this point has already been considered by various Benches of the Tribunal in a series of orders of the Tribunal including those reported in MANU/CM/0023/1989 : 1990 (48) ELT 543 (Tri.).

11. In all these orders the Tribunal has held that since the goods were only conditionally exempted therefore, it cannot be presumed that they were not duty paid and the benefit of deemed credit was required to be extended if the items in question were covered by the deemed credit provisions.

12. They would in this connection like to draw attention in particular to the order of the WRB in the case of Anin Auto Spinning and Manufacturing Company in which it has been held that deemed credit is admissible even if the products are received under a gate pass showing nil rate of duty.

13. Furthermore, it is well established that the goods in the open market are deemed to be duty paid unless proved otherwise and the open market for this purpose even includes factories. In this respect, he would like to draw attention to the Supreme Court's judgment reported in MANU/SC/0342/1989 : 1989 (43) ELT 178.

14. He would also like to draw attention to the language of the notifications in question namely 208/83, 175/84, 186/84 and 178/84 which provide for conditional exemption.

15. He would also like to draw attention to proviso to 57G(2) which refers to the "all stocks of the inputs in the country except such stock lying in the factory/Customs area (as defined in the Customs Act, 1962).

16. Sub-para 52 of 62 clearly says that the warehouse are clearly recognisable as being non-duty paid, may be deemed to be duty paid and the credit of duty in respect of said inputs may be allowed.

17. These words themselves would go to show that the goods in the open market are deemed to be duty paid; and the onus of proving that the goods were not duty paid in a given case in these circumstances was on the department, this is also evident from the order of NRB reported in 1990 (27) ECR 398.

18. He further stated that in these cases there is no dispute regarding the fact that the items in question are inputs and there is also no dispute that they were covered by conditional exemption and also there is no dispute that they were otherwise covered by the instructions of the Government regarding the deemed credit provisions. Hence in view of the provisions of 57G(2) and the clear verdict of WRB and NRB itself in the above cited cases, as also the fact that the very purpose of deemed credit scheme would otherwise be defeated, the orders of the Collector (Appeals) are required to be upheld.

19. The learned DR accepted that the facts are not in dispute and items are otherwise eligible for the benefit of modvat scheme and the cases are covered by orders of WRB and NRB as cited by the learned counsels.

20. However, he pleaded for a reconsideration of the departmental point of view as according to him the very basic principle involved in the modvat scheme was that the benefit was required to be extended only in those cases where some duty had actually been paid, and it was required to be restricted to the extent of such duty. Further in all these cases the goods were recognisable as non duty paid in view of their exempted character.

21. Hence they were hit by Clause (ii) of Government's order dated 2-11-1987.

22. He would also like to point out that this order was subsequently amended further to clarify the position.

23. The learned counsels at this stage sought leave to mention that in all these cases the period involved is prior to the date of amendment.

24. The learned DR accepted this fact but emphasised that the amendment was only clarificatory in character and therefore the Government's order under reference should be viewed in the light thereof as it clearly mentions the intention of the Government.

25. We have considered the submissions of both the sides. We find that, admittedly, the issues are already covered by the orders of the WRB and NRB cited by the learned counsels. In the circumstances it was necessary on the part of the department to show whether some aspects were left uncovered or some order of the High Court or Supreme Court to the contrary had been pronounced since then or there were other grounds sufficiently strong to move the Bench to give further thought to the matter. The department has however not done so except in so far as to draw attention to an order of the SRB said to be supportive of the departmental view point. We have gone through this order of SRB as reported in 1989 (24) ECR 488 and find that even this order does not fully support the departmental view point in as much as it has been observed therein that "on the other hand the exemption of goods covered is conditional and the department cannot deny deemed credit unless it is able to establish by enquiries that the particular material comes from the non-duty stream. In other words, the onus to prove that the goods were not duty paid was on the department and no general presumption has been raised that the goods cleared unconditionally under an exemption notification shall be treated as non-duty paid in character. Further, the department has not shown any specific ground or reason in favour of its point of view which had not been...It has also not Been able to answer a question from the Bench to the effect that once it was known that there were many materials capable of being used as inputs which were exempted conditionally, why were they included in the deemed credit provisions if the intention was that conditionally exempted goods were required to be considered as non-duty paid.

26. A reference to the amendment of the order of the Ministry in this connection is of no help, to the department as the amendment had admittedly come into effect subsequent to the period in question and has not been given a retrospective effect. Further, the effect of such amendment was itself subject to interpretation and does not come within the purview of the present case. Hence, it will not be appropriate on our part to go into that aspect at this stage.

27. In view of the above discussion we see no reason to differ from the orders of the WRB and NRB cited by the learned counsels which admittedly cover the present case.

28. We, therefore, dismiss the appeals and confirm the orders of the Collector (Appeals).