ORDER
Gowri Shankar, Member (T)
1. The question for consideration in this appeal is whether the respondent was entitled to take Modvat credit in terms of Order No. 342/1/88-TRU dated 12-7-1990 of the Government of India on a consignment of copper scrap received from the Ordinance Factory at Ambernath. The Government of India’s order, issued under second proviso to Sub-rule (2) of Rule 57G permitted credit to be taken inter alia on specified commodities without production of duty paying document subject to the condition that such scrap is not clearly recognisable as non-duty paid or subject to nil rate of duty. Assessee took credit on such a consignment.
2. Notice was issued by the department disputing the assessees action in taking the credit without duty paying documents on the ground that the goods were clearly recognisable as non-duty paid. The notice relied on a certificate issued by the Ordinance Factory that the goods are exempted from all taxes. Notice also alleged that the goods were described as swarf were not scrap within the meaning of Heading 7404.00 of the Tariff. In reply to the notice, the assessee took the stand that the goods were scrap of copper which are classifiable under Heading 7404.00. It contended that Notification No. 278/82, dated 17-11-1982 which applies to goods manufactured in an ordinance factory which exempts goods manufactured did not apply to these goods. It further contended that Notification No. 172/84 also would not render the goods to be non-duty paid because that notification granted exemption under the goods subject to the fulfillment of certain conditions, and it had not been shown that the conditions were fulfilled. The, assessee further contended that the burden of proving the goods were clearly recognisable as non-duty paid fell on the department.
3. The Assistant Collector did not pursue the contention that the goods in question was not scrap. He said that the assessee had already been told by the department in his letter dated 15-3-1993 that scrap received from Ordinance factory is totally exempted from duty by Notification No. 172/84 and the assessee was aware of this. Therefore, it has been established that the goods were clearly recognisable as non-duty paid.
4. The assessee appealed from this order. The Collector (Appeals) accepted the contention on the following reason : The scrap resulting out of duty paid goods cleared in terms of Notification No. 278/82 at nil rate of duty, should be considered to be scrap arising out of duty paid goods and therefore, eligible for the benefit of Notification No. 172/84. However, such scrap is deemed to be duty paid for the purpose of Notification No. 178/88, as was clarified to the assessee by the Asstt. Collector in his letter dated 24-2-1993. Therefore, the goods are considered to be duty paid for the purpose of Modvat credit and hence assessee entitled to credit. This appeal is from this order.
5. I have heard both sides.
6. The reasoning in the Collector (Appeals) order is specious. Notification No. 172/84 exempts waste and scrap of copper from duty provided they are manufactured out of goods falling under Heading 7401 to 7410 or arises from goods under other sub-headings or Heading manufactured in India. Heading 7401 to 7410 are, essentially copper, either unrefined or refined copper, in its primary form rods, bars, profiles, wires plates, sheets and foil. Therefore, if the copper is manufactured out of these goods or arises out of other goods, it is exempted from duty under this notification. Notification No. 178/88 exempted various copper products specified therein from duty beyond that specified, if they were made from copper on which excise duly or additional duty of custom have been paid. By letter dated February, 1993, by the office of the Collector, to the Asst Collector, Divn. K-I, Mumbai, it was explained that brass scrap cleared from ordinance factories under Notification No. 172/84 is deemed to be duty paid for the purposes of Notification No. 178/88; in other words the products mentioned in 178/88 would be entitled to exemption if made out of such scrap.
7. Now the validity of that letter is seriously open to question. I doubt whether it was open to the Assistant Collector to determine whether a particular commodity was duty paid or not. Apart from that, his clarification must be limited to the context in which it was given applicability of the Notification No. 178/88. It is a primary requirement of availing Modvat credit that duty should be paid on the inputs. This requirement is contained in Rule 57G. As has been explained in the Tribunal’s decision in Machine Builders v. CCE -1996 (83) E.L.T. 576, the effect of the order issued by the Government for taking deemed credit was not to provide for taking credit where no duty has been paid. Their purpose was to effect the benefit to the input on which duty has been actually paid but for which it might be difficult to produce duty paying documents. The Collector (Appeals)’s order ignores the basic requirement and cannot be accepted on this ground.
8. The assessee had, in reply to the notice, disputed that Notification No. 172/84 would apply to the goods contending that it had not been shown condition, out of which exemption was contained was fulfilled. However, the assessee took a different stand before the Collector (Appeals). That stand is recorded in para 3 of the order that the brass scrap received from the Ordinance Factory and cleared from the exemption Notification No. 172/84 is deemed to have been duty paid for the purpose of Notification No. 178/88. Hence it must be deemed to be duty paid for the purpose of Modvat credit. This is the submission which is favoured by the Collector (Appeals). The appeal before the Collector (Appeals) was based on a claim that the goods were entitled to Notification No. 172/84. In other words, no duty has been paid on them. This itself shows that the goods are recognisable as non-duty paid.
9. The representative of the respondent cites the decision of the Tribunal in the case of CCE v. New Allenbery Works -1999 (105) E.L.T. 73, CCE v. Jet Fasteners Pvt. Ltd. – 1999 (106) E.L.T. 32 to support his proposition that if no evidence is put forth by the department to show that the goods were cleared under an exemption notification, deemed credit cannot be denied. I would not be able to accept this in such broad terms. The Tribunal in the case of Machine Builders in para 23 had explained that if prima facie the goods were covered by exemption notification, the assessee should take the stand that it is not attracted. The department should then verify the claim as is necessary. However, I do not see the need for any such enquiry where the assessee himself bases his stand in the appeal that the goods are covered by exemption notification, which is totally exempts from duty. There would be no requirement for the department to establish that they were so covered. No such claim was made in the decisions cited by the assessee before me. The fact that the legal or logical conclusion following from this claim have not been upheld, does not show that the claim itself was wrong. The claim is one relating to fact and it cannot now be changed. It follows that the assessee accepted the Notification No. 172/84 covered the goods and hence they were non-duty paid.
10. Accordingly, I allow the appeal, set aside the impugned order.