Prima facie unsustainability of penalty on a raw-material supplier justified full waiver of pre-deposit and stay of recovery.

A merchant-manufacturer facing penalty for alleged cash payment linked to clandestine clearance of processed fabrics obtained interim relief because the Tribunal found, on a prima facie basis, that penalty under Rule 173Q(a) and Rule 173Q(d) of the Central Excise Rules, 1944 could not be sustained against a supplier of raw materials. That tentative assessment was sufficient to justify full waiver of pre-deposit and stay of recovery pending regular hearing.

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Issues: Whether the appellant was entitled to full waiver of pre-deposit and stay of recovery in respect of the penalty imposed under Rule 173Q(a) and Rule 173Q(d) of the Central Excise Rules, 1944.

Analysis: The penalty was imposed on a merchant-manufacturer for the alleged cash payment in relation to fabrics processed and removed clandestinely by a processor. On a prima facie assessment, the Tribunal found that a penalty under Rule 173Q(a) and Rule 173Q(d) on the supplier of raw materials could not be sustained. That prima facie view was sufficient to justify interim relief pending regular hearing.

Conclusion: Full waiver of pre-deposit was granted and recovery was stayed in favour of the appellant.

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