Prima facie Modvat credit claim led to modification of pre-deposit conditions and restoration of the appeal on merits.

Prima facie entitlement to Modvat credit justified modification of the earlier pre-deposit direction where the applicant relied on Chapter 39 classification based on a Section 37B Board order. The Tribunal noted that this classification basis had not been placed before the Commissioner earlier, accepted that a prima facie case was shown, and permitted Rs. 50,000 to remain unutilised in the Modvat account. The dismissal of the appeal for non-deposit was set aside, and the appeal was restored for disposal on merits subject to compliance with the modified deposit condition.

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Issues: Whether the earlier order requiring deposit of duty should be modified and the dismissal of the appeal for non-deposit set aside on the basis of a prima facie case and a reduced amount being kept unutilised in the Modvat account.

Analysis: The applicant relied on the classification of the goods under Chapter 39 pursuant to a Board order under Section 37B of the Central Excise Act, 1944, to support its claim for Modvat credit. The Tribunal found that this aspect had not been placed before the Commissioner earlier and that the applicant had shown a prima facie case. It therefore accepted the proposal to keep Rs. 50,000 unutilised in the Modvat account and modified the earlier direction.

Conclusion: The pre-deposit requirement was modified, the order dismissing the appeal for failure to deposit the entire duty was set aside, and the appeal was restored for disposal on merits upon proof of compliance with the modified condition.

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