Pre-deposit waiver in duty dispute granted where demand was broadly computed on a pro rata basis without proper exclusions

Interim relief on a duty-demand challenge under Rule 57C was granted in part because the demand appeared to have been computed on a broad pro rata basis without excluding inputs not used for exempted goods. The argument that liability rested on the oil companies and that the clearances were not by the manufacturer under the exemption notification was not accepted at the interim stage. Finding the pre-deposit objection substantial, the tribunal ordered only a reduced deposit of Rs. 5 lakhs, waived the balance, and stayed recovery subject to compliance.

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Issues: Whether, in the circumstances of the appeal, waiver of the remaining duty deposit was justified and what amount of pre-deposit should be directed.

Analysis: The application sought waiver of deposit of duty demanded under Rule 57C. The first contention that the duty liability rested on the oil companies and therefore the clearances were not by the manufacturer under an exemption notification was not accepted at the interim stage. However, the second contention had substantial force because the demand appeared to have been worked out on a broad pro rata basis across all inputs used over the relevant period without excluding inputs not used for exempted goods. The Commissioner had not satisfactorily dealt with that objection.

Conclusion: The Court directed a reduced pre-deposit of Rs. 5 lakhs and waived deposit of the remaining amount, with recovery stayed on compliance.

Final Conclusion: Interim relief was granted in part by substantially reducing the pre-deposit obligation and protecting the appellant from recovery of the balance during the stay period.

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