Cenvat credit on inputs for exempted exports under bond supported waiver of pre-deposit and stay of recovery.

Entitlement to Cenvat credit on inputs used in the manufacture of exempted goods cleared for export under bond was the central issue. The text notes that the demand stemmed from disallowance of credit during the relevant period, but the show cause notice itself indicated that the inputs were received from the appellant's unit, making any assumption that they were imported duty free prima facie incorrect. The appellant relied on Rule 6(5) of the Cenvat Credit Rules, 2002, contending that the restriction on credit for exempted goods did not apply to exports under bond, and that contention had not been addressed by the lower authority. On that basis, a prima facie case for waiver of pre-deposit and stay of recovery was found.

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Issues: Whether the appellant was entitled to waiver of pre-deposit and stay of recovery in view of the prima facie availability of Cenvat credit on inputs used in the manufacture of exempted goods cleared for export under bond.

Analysis: The demand arose from disallowance of Cenvat credit on inputs used during the relevant period for manufacture of exempted goods. The show cause notice itself indicated that the credit related to inputs received from the appellant's unit, making the finding that the inputs were imported duty free prima facie incorrect. The appellant relied on sub-rule (5) of Rule 6 of the Cenvat Credit Rules, 2002, contending that the restriction on credit for exempted goods would not apply where the goods were cleared for export under bond. That contention had been raised before the lower authority but was not dealt with.

Conclusion: The appellant made out a prima facie case for waiver of pre-deposit and stay of recovery.

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