Rule 6 Cenvat credit dispute on exempted clearances led to conditional pre-deposit and interim stay of recovery.

In a Cenvat credit dispute on common inputs used for dutiable and exempted products, the stay stage examined whether the appellant had shown a prima facie case for waiver of further pre-deposit and recovery protection under Rule 6. The Bench accepted the Revenue's prima facie position that the exempted formulations were the final products cleared from the factory and found the cited precedents not directly relevant to interim relief. Conditional interim protection was granted on further pre-deposit, with the balance of duty, penalty, and interest stayed and recovery protected pending disposal of the appeal.

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Issues: Whether, in the appeal arising from the demand under Rule 6 of the Cenvat Credit Rules, 2002, the appellant had made out a prima facie case for waiver of the balance pre-deposit and stay of recovery.

Analysis: The dispute concerned the method of computing the amount payable under Rule 6 where common inputs were used for dutiable and exempted products. The appellant's contention that the amount should not be computed on the exempted formulations was not accepted at the stay stage. The order notes that the exempted formulations were the final products cleared from the factory and that, prima facie, the Revenue had a strong case. The cited decisions were found not directly relevant for the purpose of interim relief. Since an amount had already been deposited, the Bench considered it appropriate to direct further pre-deposit and to protect the appellant against coercive recovery of the balance pending disposal of the appeal.

Conclusion: The appellant was directed to pre-deposit Rs. 20,00,000, and on such deposit the balance of duty, penalty, and interest was waived and recovery stayed until disposal of the appeal. Non-compliance was to result in dismissal of the appeal.

Final Conclusion: The order grants only conditional interim protection and does not decide the appeal on merits; the matter remains pending subject to compliance with the pre-deposit direction.

Ratio Decidendi: For purposes of interim relief in a Cenvat credit dispute involving exempted clearances, a prima facie view that Rule 6 applies to the final exempted product can justify a direction for pre-deposit and stay of recovery pending appeal.

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