Modvat credit on capital goods received before amendment date supported a prima facie case for stay of recovery.

Amended Rule 57Q was treated, at the prima facie stage, as not applicable to capital goods received before the amendment's effective date. The Tribunal noted that the Modvat credit claim related to capital goods received between January and June 1996, while the amendment relied on was introduced by Notification No. 14/96 dated 23-7-1996. On that basis, the applicants established a strong prima facie case for interim relief, and recovery of the duty demand was stayed pending disposal of the appeal.

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Issues: Whether the amended Rule 57Q could be applied to capital goods received before the date of amendment, and whether the applicants had made out a prima facie case for stay of recovery of the duty demanded pending appeal.

Analysis: The applicants claimed Modvat credit on capital goods received during the period January 1996 to June 1996. The demand was rejected on the basis of the amendment made by Notification No. 14/96 dated 23-7-1996, but the relevant question was whether that amendment could govern goods received prior to its coming into force. The Tribunal held, at the prima facie stage, that the amended notification did not appear applicable to capital goods received before 23-7-1996, and that the applicants had therefore established a strong prima facie case.

Conclusion: The applicants succeeded on the interim relief issue, and recovery of the duty was stayed during the pendency of the appeal.

Final Conclusion: Interim protection was granted to the assessee on the basis that the amendment appeared not to operate on capital goods received before its effective date.

Ratio Decidendi: An amendment to the Modvat credit provision was treated as not prima facie applicable to capital goods received before the amendment date, justifying stay of recovery pending appeal.

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