Modvat credit clarification limited full pre-28-2-1999 credit, while duty pre-deposit was directed and penalty stay granted.

The explanatory notes on the budget change were treated as allowing 100% Modvat credit for inputs received before 28-2-1999 only where no credit had already been taken before that date. As the appellants had availed 95% credit and later sought the balance 5%, the clarification was held inapplicable for purposes of full waiver of duty pre-deposit. The duty demand was therefore required to be deposited within six weeks. The penalty pre-deposit, however, was waived and recovery of the penalty stayed during the appeal, subject to compliance with the duty deposit direction.

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Issues: Whether the appellants had made out a prima facie case for waiver of pre-deposit in respect of the duty demand and penalty, and whether the balance 5% Modvat credit on inputs received before 28-2-1999 was available after the budget change.

Analysis: The order proceeded on the basis that the explanatory notes permitting 100% credit for pre-28-2-1999 inputs applied only where no credit had been taken before that date. Since the appellants had already availed 95% credit and later claimed the balance 5%, they were treated as not covered by the clarification. On that view, no prima facie case was found for complete waiver of pre-deposit. The penalty component was separately dealt with by granting waiver of its pre-deposit during the pendency of the appeal, subject to compliance with the duty deposit direction.

Outcome: The appellants were directed to deposit the duty amount within six weeks, while pre-deposit and recovery of the penalty were waived and stayed during the appeal, and the matter was listed for compliance and final hearing.

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