K.S. Venkataramani, Member (T)

1. This appeal is directed against the order dated 30-6-1987 passed by the Collector of Central Excise (Appeals), Madras, by which he had upheld the order dated 20-2-1987 passed by the Assistant Collector of Central Excise, Lal Bagh Division, Bangalore, denying the appellants deemed MODVAT credit on Copper Waste and Scrap of Aluminium and unwrought Copper which they had availed in terms of the direction of the Government of India dated 7-4-1986 issued under Rule 57G(2) of the Central Excise Rules, 1944. The amount of MODVAT credit which the appellants were asked to reverse on this ground was Rs. 1,62,321.52.

2. The appellants are engaged in the manufacture of machined and unmachined Copper-base Alloy castings and components falling under various sub-headings of the Central Excise Tariff Act, 1985. They used unwrought copper and waste and scrap of Copper and Scrap of Aluminium as inputs in the manufacture of the final products mentioned above. They opted for MODVAT with effect from 11-6-1986 after filing the requisite declaration under Rule 57G on 5-6-1986. In terms of Government of India, Ministry of Finance order dated 7-4-1986 issued under Rule 57G(2) of the Central Excise Rules, the appellants had taken deemed credit of duty on unwrought Copper and Waste and Scrap of Copper and Aluminium during the period from 11-6-1986 to 10-11-1986. However, the Department issued a Show Cause Notice on 22-8-1986 on the ground that deemed credit of duty in respect of Waste and Scrap of Copper falling under subheading 7402.00 cleared at 'Nil' rate of duty under Notification No. 172/84, dated 1-8-1984 and Aluminium Scrap falling under sub-heading No. 7602.00 cleared at 'Nil' rate of duty under Notification No. 182/84 dated 1-8-1984 is not permissible and that credit taken will have to be reversed. This is because the Government of India Order dated 7-4-1986 regarding deemed credit says that no such deemed credit can be taken where the inputs are clearly identifiable as non-duty paid and in this case the Department held that these inputs being exempt are so identifiable. The Assistant Collector on consideration of the appellants' reply to the charges ordered the reversal of the credit which was confirmed in appeal by the Collector (Appeals).

3. Shri G. Sampath, the learned Counsel for the appellants contended that denial of deemed credit by the Department was unjust. He referred to the Notification No. 172/84 in respect of Waste and Scrap of Copper and Notification No. 182/84 in respect of Wasteland Scrap of Aluminium as also Notification No. 149/86 in respect of unwrought Copper and pointed out that in these Notifications themselves there is an Explanation that for the purposes of the Notification all stocks of copper and products thereof and aluminium and products thereof shall be deemed to be duty paid. Therefore, it cannot be held, as has been done by the Department, that because of these exemption Notifications, the inputs utilised by the appellants are non-duty paid and therefore, ineligible for deemed credit. The learned Counsel pointed out that it is for the Department to show that as to how the goods are identifiable as non-duty paid because the appellants had purchased these materials from the open market. He also relied upon the decision of the North Regional Bench of the CEGAT in the case of Collector of Central Excise v. Kapsons Electro Stampings reported in MANU/CE/0221/1988 : 1988 (37) E.L.T. 323 (Tribunal) wherein under similar circumstances the Tribunal had held that it is for the Department to produce sufficient evidence that the inputs are clearly recognisable as non-duty paid. Similarly in a decision the Collector of Central Excise (Appeals), Delhi, in the case of NarankarAuto Engg. Works in Order-in-Appeal No. 441 dated 22-8-1988 had also held that merely relying on exemption Notification which exempts the inputs under the deemed credit scheme from the whole of duty cannot be the basis for