Departmental circulars on wrong credit recovery supported waiver of pre-deposit and stay of duty and penalty recovery.

Departmental circulars governed the dispute over whether wrongly taken credit on inputs used in exempted goods was recoverable under the rule corresponding to the erstwhile recovery provision. The later circular supported the assessee's contention that the credit was incorrectly taken and recoverable under that mechanism, while an earlier circular stated that the 8% amount was not duty. As officers are bound by circulars, the later clarification made out a prima facie case for relief. Waiver of pre-deposit was therefore justified and recovery of the duty demand and penalties was stayed pending further proceedings.

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Issues: Whether pre-deposit of the duty demand and penalties should be waived and recovery stayed in view of the Board circular clarifying that wrongly taken credit on inputs used in exempted goods is recoverable under the provision corresponding to the erstwhile recovery rule.

Analysis: The demand was founded on the view that the assessee had used exempted inputs in manufacturing exempted boilers and, therefore, was liable to pay an amount linked to the value of the exempted clearances. The circular relied upon clarified that where the corresponding amount had not been paid, the credit taken on inputs was incorrect and its recovery was covered by the rule corresponding to the erstwhile recovery provision. The order also noted that this circular was prima facie inconsistent with an earlier departmental circular stating that the amount of 8% was not duty. Since departmental officers are bound by circulars, and the later circular directly supported the assessee's contention on the character and recovery of the credit, a prima facie case existed for relief.

Conclusion: The assessee was entitled to waiver of pre-deposit and stay of recovery of the duty demand and penalties.

Final Conclusion: Interim relief was granted by protecting the assessee from immediate recovery of the disputed duty and penalties pending further proceedings.

Ratio Decidendi: When departmental circulars support the assessee's position and officers are bound by them, a contradictory earlier circular cannot defeat a prima facie entitlement to waiver of pre-deposit and stay of recovery.

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