Show cause notice scope and prima facie case led to waiver of pre-deposit and stay of recovery

A prima facie case for waiver of pre-deposit arose where the duty demand was founded in the show cause notice on alleged removal of goods without payment of duty, but the impugned order confirmed duty on a different basis, namely gross negligence and failure to take safety measures after a fire. The mismatch indicated that the order appeared to travel beyond the scope of the notice, requiring fuller examination in appeal. On that footing, pre-deposit of duty and penalty was waived and recovery stayed pending disposal of the appeal.

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Issues: Whether, in the facts of the case, the appellant had made out a strong prima facie case for waiver of pre-deposit and stay of recovery; and whether the impugned demand order appeared to travel beyond the scope of the show cause notice.

Analysis: The demand notice proceeded on the basis that the goods destroyed in fire had been removed without payment of duty in contravention of Rule 9 read with Rule 49 of the erstwhile Central Excise Rules, 1944. The impugned order, however, confirmed duty on a different footing, namely alleged gross negligence and failure to take safety measures to prevent fire. The order also noted the factual background of repeated permission to store finished goods outside the bonded store room, supporting the view that the issue required deeper examination in the appeal.

Conclusion: A strong prima facie case was made out for the appellant, and pre-deposit of duty and penalty was waived with stay of recovery pending the appeal.

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