Mandatory compliance under Rule 57CC(9) limits waiver of pre-deposit; post-removal reversal of credit does not cure the breach.

Rule 57CC(9) required manufacturers to maintain separate inventory and accounts for inputs used in exempted final products and barred credit on such inputs. The article notes that this compliance obligation was treated as mandatory, and admitted violation prevented total waiver of pre-deposit at the interim stage. Reversal of modvat credit after removal of the exempted goods was not accepted as a complete cure, because the cited authorities were understood to permit reversal only before such removal. Limited interim relief was therefore considered appropriate instead of full waiver.

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Issues: Whether the applicant was entitled to total waiver of pre-deposit in proceedings arising under Rule 57CC(9), and whether reversal of modvat credit after removal of exempted final products could cure non-compliance with the rule.

Analysis: Rule 57CC(9) required the manufacturer to maintain separate inventory and accounts of the receipt and use of inputs used in exempted final products and prohibited taking credit on such inputs. The order reasoned that this obligation was mandatory and that violation of the rule had admittedly occurred. Reliance on reversal of credit after removal of the exempted goods was not accepted as sufficient for complete waiver, because the reasoning drawn from the cited authorities was understood to permit reversal only before removal of the exempted final products. On that basis, total waiver of pre-deposit was found unwarranted at the interim stage.

Conclusion: Total waiver of pre-deposit was refused, and only partial relief was granted by directing deposit of Rs. 5 lakhs, with waiver of the balance during the pendency of the appeal.

Final Conclusion: The stay application was disposed of by granting limited interim protection and conditioning continuation of that relief on deposit of Rs. 5 lakhs within the stipulated time.

Ratio Decidendi: Under Rule 57CC(9), compliance by reversal of credit is effective only if done before removal of the exempted final products, and non-compliance cannot be cured by post-removal reversal for purposes of complete interim relief.

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