Prima facie Modvat credit transfer justified waiver of pre-deposit of duty and penalty at the interim stage.

A prima facie case on the admissibility of Modvat credit transfer between the sugar and distillery divisions justified interim relief. The appellant argued that credit earned on molasses in the distillery division could be transferred to the sugar division for payment of duty on sugar under the relevant Modvat provisions and departmental clarification, while the Department objected on the basis of separate records and the applicable inter-unit transfer rule. On the materials placed, the Tribunal found the assessee had established a prima facie case and granted waiver of pre-deposit of duty and penalty.

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Issues: Whether the appellant was entitled to waiver of pre-deposit of duty and penalty in view of a prima facie case on the admissibility of transfer and utilisation of Modvat credit between the sugar and distillery divisions.

Analysis: The appellant contended that credit earned on molasses in the distillery division could be transferred to the sugar division for payment of duty on sugar, relying on the relevant Modvat provisions and departmental clarification. The Department opposed the transfer on the ground that separate records were maintained for the divisions and that the transfer was permissible only under the applicable rule governing such inter-unit movement of credit. On the materials placed, the Tribunal found that the appellant had made out a prima facie case in its favour for the purpose of interim relief.

Conclusion: Waiver of pre-deposit of duty and penalty was granted.

Ratio Decidendi: Where the assessee establishes a prima facie case on the admissibility of Modvat credit transfer, waiver of pre-deposit is justified at the interim stage.

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