CENVAT credit on capital goods used for exempt products supported waiver of pre-deposit and stay of recovery.

Use of Dobby Cards in the manufacture of exempted final products did not, on the prima facie view recorded, bar CENVAT credit merely because the capital goods were used for exempt output. The Tribunal also noted that earlier orders had extended the benefit of Notification No. 67/95 to the same goods. On that basis, the applicant was held entitled to waiver of pre-deposit of duty and penalty, and recovery was stayed pending disposal of the appeal.

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Issues: Whether the applicant was entitled to waiver of pre-deposit of duty and penalty and stay of recovery pending the appeal.

Analysis: The application concerned denial of exemption benefit in relation to Dobby Cards used in the manufacture of exempted final products. The Tribunal found prima facie support for the contention that the goods were capital goods and that there was no bar to credit merely because such capital goods were used for manufacturing exempted goods. It also noted that the department had extended the benefit of Notification No. 67/95 to the same goods in earlier orders.

Conclusion: The applicant was entitled to waiver of pre-deposit and stay of recovery pending disposal of the appeal.

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