Cenvat credit on molasses: reversal for exempt clearances and no revenue loss justified waiver of pre-deposit and stay.

Cenvat credit on molasses used in a composite unit was examined in the context of waiver of pre-deposit and stay of recovery. The Tribunal noted that credit attributable to the exempted product had been reversed, duty had already been paid on the molasses, and the record did not show any revenue loss. It also found the objection based on the assessee's own invoice under Rule 7 of the Cenvat Credit Rules, 2002 to be contentious on the facts before it. On that basis, a strong prima facie case for interim relief was made out and full waiver of pre-deposit of duty and penalty, with stay of recovery, was granted.

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Issues: Whether the appellant was entitled to waiver of pre-deposit and stay of recovery in respect of the demand, interest and penalty arising from availed Cenvat credit on molasses used in the composite unit, particularly when credit on the exempted portion had been reversed and duty had been paid on the molasses.

Analysis: The disputed credit was taken on molasses cleared to the distillery unit within the same factory for manufacture of rectified spirit, denatured spirit and ethanol. The appellant's case that credit relatable to rectified spirit had been reversed under the Cenvat Credit Rules was not examined by the adjudicating authority. The Tribunal also noted that the objection based on the appellant's own invoice under Rule 7 of the Cenvat Credit Rules, 2002 was contentious, and on the facts before it, Rule 7 did not bar availment of credit where duty had already been discharged. Since the appellant had reversed the credit attributable to the exempted product and no revenue loss was shown, a strong prima facie case for interim relief was made out.

Conclusion: The appellant was held entitled to full waiver of pre-deposit of duty and penalty, and recovery was stayed until disposal of the appeal.

Final Conclusion: Interim protection was granted to the appellant, and the stay application was disposed of with no recovery pending the appeal.

Ratio Decidendi: Where duty has been paid and the credit attributable to exempted clearances has been reversed, and no revenue loss is shown, pre-deposit may be waived and recovery stayed at the interim stage.

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