Classification dispute and Modvat credit supported a prima facie case for unconditional waiver of pre-deposit.

Classification dispute over whether the product fell under heading 3824.90 or heading 25.05, with exemption claimed under Notification No. 4/94, was treated as a strong prima facie case for waiver. After taking Modvat credit into account, the duty liability was materially reduced, and the record also supported a bona fide belief that the product was exempt and correctly classifiable under heading 25.05. Those factors further strengthened the limitation plea. On that basis, unconditional waiver of pre-deposit of duty and penalty was granted.

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Issues: Whether the appellants had made out a prima facie case for unconditional waiver of pre-deposit of duty and penalty, including on the grounds of Modvat credit and limitation.

Analysis: The demand was said to arise from classification of the product under heading 3824.90 instead of heading 25.05 with exemption under Notification No. 4/94. On the material placed, the amount of duty payable was substantially reduced after giving effect to Modvat credit. The record also indicated a bona fide belief that the product was exempt and correctly classifiable under heading 25.05, supported by the position taken in respect of the appellant's other units, which furnished a strong prima facie case and lent support to the plea of limitation.

Conclusion: The appellants were entitled to unconditional waiver of pre-deposit.

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