Modvat credit allegation under duty-free import conditions justified waiver of pre-deposit and stay of recovery pending appeal.

Modvat credit allegations under Notification No. 203/92 were used to confirm duty and penalty on the premise that credit had been wrongly taken despite the duty-free import condition. The CESTAT noted that the show cause notices and impugned orders did not disclose the basis for alleging that the transferor-manufacturer of the export goods had availed Modvat credit. On that limited record, a prima facie case for waiver of pre-deposit was found. Waiver of pre-deposit was granted and recovery of duty and penalty was stayed pending appeal.

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Issues: Whether waiver of pre-deposit of duty and penalty and stay of recovery pending appeal should be granted.

Analysis: The applications arose from confirmation of duty and imposition of penalty on the allegation that Modvat credit had been availed in breach of Notification No. 203/92 governing duty-free import subject to the condition that credit had not been taken on inputs. The show cause notices and the impugned orders did not disclose the basis for the allegation that Modvat credit had been availed by the transferor-manufacturer of the export goods. On that footing, a prima facie case for waiver was found to exist.

Conclusion: Waiver of pre-deposit was granted and recovery of duty and penalty was stayed pending the appeals, in favour of the assessee.

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