Benara Udyog Pvt. Ltd. Vs. Collector of Central Excise - Court Judgment

Excerpt:
1. this is an appeal against the order of collector (appeals), allahabad dated 3-1-1994/4-1-1994.2. ld. counsel stated that the appellants are manufacturer of plain shaft bearings and bimetal strips falling under sub-heading 8483.00 and 7212.90 of the central excise tariff act, 1985. the appellants were availing modvat facility after filing the proper declaration under rule 57g. the appellants were also availing deemed credit on the inputs i.e.lead alloy, copper scrap, copper ingots wire bars, and aluminium scrap purchased from the open market. they received two show cause notices proposing denial of deemed credit on the ground that the deemed credit on various types of metal scrap is not available to the appellants w.e.f. 11-9-1990. it was alleged that such scrap is not generated due to conscious manufacturing activities in the factory of production and are therefore clearly recognisable as non-duty paid. it is submitted that the deemed credit is permissible to the appellants in terms of the board's order f. no. 342/1/88-tru, dated 12-7-1990 and 342/5/91-tru, dated 7-7-1992 and no general presumption can be made that such goods are clearly recognisable as non-duty paid or charged to nil rate of duty. departmental instruction dated 11-9-1990 was not circulated to the appellants therefore the same is not enforceable. as per the board's direction only three types of goods are clearly recognisable as non-duty paid.the relevant inputs do not fall under the aforesaid three categories of goods therefore the same area are deemed duty paid. the show cause notice is not containing any allegation against the appellant. the ld.collector (appeals) has failed to deal with the contentions raised by the appellants and no specific finding has been given. hence this non-speaking order itself is null and void.3. he further submitted that the instruction issued by the department dated 11-9-1990 and the show cause notice are against the deemed credit provisions and will defeat the very objective of the legislation and the modvat scheme. the words "purchased from outside" used in the board's letter dated 12-7-1990 have a wide amplitude and include the specified goods "purchased from open market". the department had not produced any evidence regarding their non-duty paid character. in this connection they would draw attention to the case law cited in the appeal memo.4. ld. dr drew attention towards the impugned order and reiterated the department's view as contained therein.5. ld. counsel cited tribunal's order in the case of machine builders - 1996 (83) e.l.t. 576 (tribunal) in support of his contentions.6. i have considered the above submissions. i observe that it is already a well established and well settled point of law that goods purchased from the open market are deemed to be duty paid unless proved otherwise. furthermore, the excise is chargeable at the time of clearance from the factory after manufacture and not after the goods have been used and thrown away or disposed of to kabaris. it is also noteworthy that it is virgin scrap which is considered as dutiable goods and not used material/articles which have been scrapped. as the scrap is of various types, arises in different ways, is generated at different sources and is usable for various purposes it is necessary to ascertain the nature and type of scrap before applying any order or circular. if the inputs included sillis obtained from melting or ingots and wire bars, prima facie they would fall in a different category. ld.counsel's contentions that action or order based merely on board's circular was not valid is not acceptable in view of the latest supreme court judgment to the effect that board's circular or orders issued in terms of the powers vested in that authority under section 37b are required to be followed by their sub-ordinate authorities. at the same time order no. 342/1/88-tru, dated 12-7-1990 (effective from 16-7-1990) incorporates a table indicating the description of inputs the headings or sub-headings in which they fall and the rate of duty deemed to have been paid. obviously this refers to excisable items (including such metal waste and scrap as was classifiable under headings shown therein). evidently the reference here is to the virgin waste and scrap generated during the course of manufacture of articles of those metals classifiable under the heading shown and allowed to be cleared at the rate prescribed therein from the factory. this order does nowhere refer to bazar scrap. the trade notice no. 19/93 on the other hand refers to bazar scrap on which the modvat credit is being claimed. however, it is not binding on the tribunal and the govt. of india appears to have itself taken a different view later. the machine builder's case cited by the appellants does not help beyond a point inasmuch as the facts involved in that case are different. the order in that case mainly discusses inter alia the interpretation and implication of govt. of india orders dated 7-4-1986, 2-5-1987 and 2-11-1987 whereas our attention in this connection has been drawn to different orders mentioned above. it is also well settled that if the department seeks to deny the benefit on the ground that the input were non-duty paid the burden is on the department. it is also evident that the appellants are correct in pointing out that the authorities below have not dealt with the relevant aspects and the order of the collector (appeals) is a non-speaking order. it is therefore, set aside and the matter remanded to the collector (appeals) for de novo consideration in accordance with law with the direction that he should deal with all the relevant aspects and pass a speaking order after giving an opportunity to the appellants to be heard in the matter.

Judgment:
1. This is an appeal against the order of Collector (Appeals), Allahabad dated 3-1-1994/4-1-1994.

2. Ld. Counsel stated that the appellants are manufacturer of Plain Shaft Bearings and Bimetal Strips falling under sub-heading 8483.00 and 7212.90 of the Central Excise Tariff Act, 1985. The appellants were availing Modvat facility after filing the proper declaration under Rule 57G. The appellants were also availing deemed credit on the inputs i.e.

lead alloy, copper scrap, copper ingots wire bars, and aluminium scrap purchased from the open market. They received two show cause notices proposing denial of deemed credit on the ground that the deemed credit on various types of metal scrap is not available to the appellants w.e.f. 11-9-1990. It was alleged that such scrap is not generated due to conscious manufacturing activities in the factory of production and are therefore clearly recognisable as non-duty paid. It is submitted that the deemed credit is permissible to the appellants in terms of the Board's Order F. No. 342/1/88-TRU, dated 12-7-1990 and 342/5/91-TRU, dated 7-7-1992 and no general presumption can be made that such goods are clearly recognisable as non-duty paid or charged to nil rate of duty. Departmental instruction dated 11-9-1990 was not circulated to the appellants therefore the same is not enforceable. As per the Board's direction only three types of goods are clearly recognisable as non-duty paid.

The relevant inputs do not fall under the aforesaid three categories of goods therefore the same area are deemed duty paid. The show cause notice is not containing any allegation against the appellant. The ld.Collector (Appeals) has failed to deal with the contentions raised by the appellants and no specific finding has been given. Hence this non-speaking order itself is null and void.

3. He further submitted that the instruction issued by the department dated 11-9-1990 and the show cause notice are against the deemed credit provisions and will defeat the very objective of the legislation and the Modvat scheme. The words "purchased from outside" used in the Board's letter dated 12-7-1990 have a wide amplitude and include the specified goods "purchased from open market". The department had not produced any evidence regarding their non-duty paid character. In this connection they would draw attention to the case law cited in the appeal memo.

4. Ld. DR drew attention towards the impugned order and reiterated the department's view as contained therein.

5. Ld. Counsel cited Tribunal's order in the case of Machine Builders - 1996 (83) E.L.T. 576 (Tribunal) in support of his contentions.

6. I have considered the above submissions. I observe that it is already a well established and well settled point of law that goods purchased from the open market are deemed to be duty paid unless proved otherwise. Furthermore, the excise is chargeable at the time of clearance from the factory after manufacture and not after the goods have been used and thrown away or disposed of to kabaris. It is also noteworthy that it is virgin scrap which is considered as dutiable goods and not used material/articles which have been scrapped. As the scrap is of various types, arises in different ways, is generated at different sources and is usable for various purposes it is necessary to ascertain the nature and type of scrap before applying any order or circular. If the inputs included sillis obtained from melting or ingots and wire bars, prima facie they would fall in a different category. Ld.

Counsel's contentions that action or order based merely on Board's circular was not valid is not acceptable in view of the latest Supreme Court judgment to the effect that Board's circular or orders issued in terms of the powers vested in that authority under Section 37B are required to be followed by their sub-ordinate authorities. At the same time Order No. 342/1/88-TRU, dated 12-7-1990 (effective from 16-7-1990) incorporates a table indicating the description of inputs the headings or sub-headings in which they fall and the rate of duty deemed to have been paid. Obviously this refers to excisable items (including such metal waste and scrap as was classifiable under headings shown therein). Evidently the reference here is to the virgin waste and scrap generated during the course of manufacture of articles of those metals classifiable under the heading shown and allowed to be cleared at the rate prescribed therein from the factory. This order does nowhere refer to bazar scrap. The Trade Notice No. 19/93 on the other hand refers to bazar scrap on which the Modvat credit is being claimed. However, it is not binding on the Tribunal and the Govt. of India appears to have itself taken a different view later. The Machine Builder's case cited by the appellants does not help beyond a point inasmuch as the facts involved in that case are different. The order in that case mainly discusses inter alia the interpretation and implication of Govt. of India orders dated 7-4-1986, 2-5-1987 and 2-11-1987 whereas our attention in this connection has been drawn to different orders mentioned above. It is also well settled that if the department seeks to deny the benefit on the ground that the input were non-duty paid the burden is on the department. It is also evident that the appellants are correct in pointing out that the authorities below have not dealt with the relevant aspects and the order of the Collector (Appeals) is a non-speaking order. It is therefore, set aside and the matter remanded to the Collector (Appeals) for de novo consideration in accordance with law with the direction that he should deal with all the relevant aspects and pass a speaking order after giving an opportunity to the appellants to be heard in the matter.