Pre-deposit and exemption claim in tarpaulin manufacture led to only partial waiver of recovery pending appeal.

At the pre-deposit stage under Section 35F of the Central Excise Act, 1944, the Tribunal considered whether the appellants had a prima facie case for exemption under Notification No. 54/87-C.E. in respect of tarpaulin cloth clearances within the prescribed limit. The record showed cutting of tarpaulin cloth to size and stitching all four sides with power-operated machines, and no earlier finding had been recorded on the use of power in manufacture. On that material, the Tribunal accepted a strong prima facie case for the exemption claim for part of the clearances, but not for the entire duty demand, and therefore ordered only a limited pre-deposit while granting stay of recovery for the balance.

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Issues: Whether the appellants were entitled to waiver of the balance pre-deposit and stay of recovery in respect of the duty and penalty demanded, having regard to the prima facie claim of exemption under Notification No. 54/87-C.E. and the requirements of Section 35F of the Central Excise Act, 1944.

Analysis: The appeal arose at the stage of consideration of pre-deposit under Section 35F. The record indicated that the manufacturing process involved cutting tarpaulin cloth to size and stitching all four sides with power-operated machines, and the Tribunal noted that no finding had earlier been recorded on the use of power for manufacture of tarpaulin cloth. On this material, the appellants showed a strong prima facie case for claiming exemption for tarpaulin cloth clearances not exceeding the prescribed limit under Notification No. 54/87-C.E. The Tribunal, however, did not accept a strong prima facie case in relation to duty on tarpaulin and therefore required a limited pre-deposit.

Conclusion: The appellants were granted partial waiver of pre-deposit and stay of recovery on depositing Rs. 2,00,000 within the stipulated time, with the balance duty and penalty waived for the purpose of the appeal.

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