Prima facie use in dutiable manufacture justified stay of duty recovery despite some rejected finished goods.

Components used in the manufacture of dry battery cells were treated, on the material before CESTAT, as having a prima facie nexus with dutiable final products, supporting waiver of pre-deposit and stay of recovery. The tribunal noted that the mere rejection or damage of some finished batteries during manufacture did not, at this stage, displace the claim that the components were used in producing goods chargeable to duty. On that basis, a strong prima facie case for interim relief was established and recovery of the duty and penalty was stayed pending appeal.

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Issues: Whether the applicants had made out a strong prima facie case for waiver of pre-deposit and stay of recovery of duty and penalty in respect of components used in the manufacture of dry battery cells claimed to be exempt under Notification No. 67/95-C.E. dated 16-3-1995.

Analysis: The components manufactured by the applicants were used in the manufacture of dry battery cells, which were chargeable to duty. The mere fact that some batteries were rejected or damaged in the course of manufacture did not, at this stage, negate the plea that the components were used in the manufacture of dutiable final products. On the materials before it, the applicants established a strong prima facie case for interim relief.

Conclusion: The recovery of the entire amount of duty and penalty was stayed during the pendency of the appeal, in favour of the applicants.

Ratio Decidendi: Where the goods are shown, at least prima facie, to have been used in the manufacture of dutiable final products, interim stay of recovery may be granted notwithstanding rejection or damage of some of the finished goods in the manufacturing process.

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