P.C. Jain, Member (T)

1. Since a common question is involved in all the three appeals, a common order is being passed.

2. Short question involved in these appeals is whether the MODVAT credit taken by the respondents herein in terms of Government of India's order F.No. B-22/5/86-TRU, dt. 7.4.1986 on steel sheets purchased from the open market from dealers of iron and steel products is permissible or not. The department contends, as a common ground of appeal, that the said deemed credit taken by the respondents herein is not admissible because the M.S. sheets are wholly exempted from duty under Notification 208/83, dated 1.8.1983 (as amended) and therefore, such M.S. sheets on which deemed credit has been taken by the respondents are clearly recognisable as non-duty paid and hence in terms of proviso (ii) to para 2 of Government of India's aforesaid order dated 7.4.1986 would apply making the credit Inadmissible.

The respondent company, on the other hand, contends inter alia, that the Notification 208/83, dated 1.8.1983 (as amended) does not give unconditional exemption, inter alia, to M.S. sheets. Before the sheets can be taken as wholly exempted under the said notification either of the two conditions have to be satisfied. Those conditions are as follows :-

(I) Final products (namely M.S. Sheets herein) are made from inputs described in col. 2 of the table to the notification are already duty paid under the Central Excises and Salt Act or had paid the additional duty of Customs under the Customs Tariff Act, 1975; or

(II) No credit of duty paid on the inputs from which the final product (namely M.S. sheets herein) had been taken under Rule 56A of the Central Excises Rules.

The department has not adduced, according to the respondents, any evidence that any of the above two conditions has been fulfilled in respect of the Inputs out of which M.S. sheets have been manufactured and in respect of which the deemed credit has been taken by them. A dealer in iron and steel products gets the goods from various sources and it is not possible to distinguish about the source of manufacture of the M.S. sheets. The sheets might have come to the dealer from the primary (ore-based) manufacturer of iron and steel products or it may be from a secondary manufacturer of iron and steel products. It is only in case of secondary manufacturer of M.S. sheets that it may be possible to say that the inputs might be duty paid. Department has produced no evidence regarding the identity of M.S. sheets purchased by the respondents from the iron and steel products dealers from the market. Government of India's order dated 7.4.1986, according to the respondents, permitting deemed credit on M.S. sheets is unambiguous and it is for the department to prove by adducing sufficient evidence that the sheets purchased from the market are clearly recognisable as non-duty paid. The department's contention, according to the respondents that the onus to prove that the M.S. sheets are duty paid Shifts on the assessee is not tenable.

3. In order to appreciate the foregoing controversy it is appropriate to set out the provisions of the relevant rules, Government of India's order and the Notification 208/83, dated 1.8.1983.

4. Rule 57-G laysdown the procedure to be observed by a manufacturer for taking credit of duty paid on specified inputs and utilised for manufacture of specified final products. One of the essential parts of the procedure is that the manufacturer has to produce either a gate pass, an A.R.I or a bill of entry evidencing the payment of duty on such input. However, this essential condition is waived in terms of 2nd proviso to Sub-rule (2) of Rule 57-G which is as follows :-

"Provided further that having regard to the period that has elapsed since the duty of excise was imposed on any inputs, the position of demand and, supply of the said inputs in the country and any other relevant considerations, the Central Government may direct that with effect from a specifie