Modvat credit on inputs for exempted goods was treated as prima facie available, with recovery stayed pending appeal.

A manufacturer may, on a prima facie basis, choose to pay duty on exempted final products and avail Modvat credit on inputs used in their manufacture where that position is supported by the earlier Everest Converters line of authority. Applying that precedent, the Tribunal found the dispute covered at the interim stage and granted protection against recovery pending appeal. The demanded duty and imposed penalty were therefore waived from pre-deposit, recovery was stayed, and the appeals were directed to be heard.

---

---

Issues: Whether the assessee was entitled, prima facie, to pay duty on exempted final products and avail Modvat credit on inputs, and whether pre-deposit of the demanded duty and penalty should be waived pending appeal.

Analysis: The Tribunal noted that the earlier decision in Everest Converters, followed in several cases, had held that a manufacturer could opt to pay duty on exempted goods and avail Modvat credit of the duty paid on inputs used in their manufacture. As the dispute was prima facie covered by that decision, the Tribunal accepted the request for interim protection and stayed recovery.

Outcome: Deposit of the demanded duty and imposed penalty was waived and their recovery stayed, and the appeals were listed for hearing.

---