Pre-deposit waiver on conflicting excise interpretations and binding circular support for yarn exemption claim.

The note addresses interim waiver of pre-deposit in a CESTAT matter concerning two excise exemption questions. For Notification No. 2/95-C.E., the computation issue was already referred to a Larger Bench because conflicting Tribunal views existed, and that conflict itself supported a strong prima facie case for waiver and stay of recovery. For Notification No. 3/2001, covered yarn claimed exemption as air-mingled yarn where the manufacturing condition appeared satisfied; a contemporaneous departmental circular treated nil duty as sufficient for "appropriate duty of excise", and that circular was binding on the Revenue until withdrawn. On both issues, pre-deposit was waived and recovery stayed pending appeal.

---

---

Issues: (i) Whether, for the purpose of Notification No. 2/95-C.E., duty on clearances from a 100% export-oriented unit was payable on 50% of each customs duty component or on 50% of the aggregate duties of customs; (ii) Whether covered yarn classifiable under Chapter Heading 5402 could prima facie claim exemption under Notification No. 3/2001 as air-mingled yarn on satisfaction of the prescribed conditions.

Issue (i): Whether, for the purpose of Notification No. 2/95-C.E., duty on clearances from a 100% export-oriented unit was payable on 50% of each customs duty component or on 50% of the aggregate duties of customs.

Analysis: The question on the correct method of computation under the notification was already under reference to a Larger Bench because conflicting views had been taken on the interpretation of the notification. In the presence of two contrary Tribunal views on the same issue, the applicants established a strong prima facie case for waiver of pre-deposit.

Conclusion: The demand based on this issue was ordered to be waived by way of pre-deposit, with recovery stayed pending the appeal.

Issue (ii): Whether covered yarn classifiable under Chapter Heading 5402 could prima facie claim exemption under Notification No. 3/2001 as air-mingled yarn on satisfaction of the prescribed conditions.

Analysis: The notification covered air-mingled yarn falling under the relevant sub-headings, subject to manufacture out of specified base yarn and payment of appropriate duty of excise on the base yarn. The applicants showed prima facie compliance with the manufacturing condition, and the contemporaneous departmental circular treated nil duty as sufficient for the expression "appropriate duty of excise". That interpretation was binding on the Revenue until withdrawn, and prima facie supported the claim for exemption.

Conclusion: The demand on this count was also ordered to be waived by way of pre-deposit, and recovery was stayed.

Final Conclusion: The applications for waiver succeeded, the duty and penalty amounts were not required to be pre-deposited, and recovery was stayed during pendency of the appeals.

Ratio Decidendi: Where conflicting interpretations exist and a binding departmental circular supports the assessee, a strong prima facie case can justify waiver of pre-deposit and stay of recovery at the interim stage.

---