Pre-deposit waiver in duty disputes requires a strong prima facie case and proven hardship; complete waiver was refused here.

Prima facie waiver of pre-deposit depends on both a substantial case on merits and demonstrated hardship. In this CESTAT note on differential duty and penalties, the Tribunal found serious doubt over the department's reliance on mutuality of interest, non-compete fee treatment, and alleged technical know-how transfer, but held that the appellants had still not shown a sufficiently strong prima facie case for complete waiver. Financial hardship was also considered from the audited losses, yet complete waiver was declined. The Tribunal required deposit of 10% of the duty demanded and granted waiver of the balance pre-deposit and stay of recovery on compliance.

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Issues: Whether the appellants made out a strong prima facie case and undue hardship warranting complete waiver of pre-deposit and stay of recovery in the duty and penalty matters.

Analysis: The appeals arose from orders demanding differential duty and imposing penalties on the footing that the transfer price between the manufacturing entities and their buyers could not be accepted because of alleged mutuality of interest and related extra-commercial considerations. On a prima facie appraisal, the Tribunal found that some of the factors relied upon by the department were open to serious doubt, including the treatment of the non-compete fee, the relevance of the alleged technical know-how transfer, and the basis on which mutuality of interest was inferred. At the same time, the Tribunal held that the appellants had not established a sufficiently strong prima facie case for full waiver. Financial hardship was also considered, including the losses shown in the audited accounts.

Conclusion: Complete waiver was declined. The appellants were directed to deposit 10% of the duty demanded, and on such compliance, waiver of the balance pre-deposit and stay of recovery were granted.

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