CENVAT credit utilisation dispute on Education Cess allowed interim relief and stay of recovery pending appeal.

Rule 3(4) read with Rule 3(7) of the CENVAT Credit Rules was treated as not prima facie barring utilisation of Basic Excise Duty credit for payment of Education Cess, because the restriction appeared to apply only to Education Cess credit. As the dispute turned on a pure question of law, the appellant made out a prima facie case for waiver of pre-deposit and stay of recovery pending appeal. Interim relief was therefore granted, and recovery of the duty demand was stayed until disposal of the appeal.

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Issues: Whether the appellant had made out a prima facie case for waiver of pre-deposit and stay of recovery in relation to the demand arising from use of Basic Excise Duty credit for payment of Education Cess.

Analysis: The demand arose from debiting Basic Excise Duty towards payment of Education Cess on final product clearances. The bar on utilisation was held to relate only to Education Cess credit, while Rule 3(4) read with Rule 3(7) of the CENVAT Credit Rules did not, prima facie, prohibit utilisation of Basic Excise Duty for payment of Education Cess. The dispute was treated as a pure question of law, supporting interim relief.

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

Final Conclusion: Interim relief was granted on the basis that the credit utilisation issue raised a legal question and did not justify immediate recovery pending appeal.

Ratio Decidendi: Where the credit rules do not prima facie prohibit the particular mode of utilisation, and the dispute turns on a pure question of law, waiver of pre-deposit and stay of recovery may be granted.

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