Cenvat credit dispute over broken bottles: compensation from dealers did not, by itself, justify denial of credit or pro rata reversal.

Cenvat credit on bottles broken after clearance was not disputed in principle, but the demand was sustained only because compensation was later received from dealers. The order noted that no provision showed such subsequent compensation, by itself, made the earlier credit wrongful, and there was no one-to-one correlation between the two. It also found that the department's pro rata reversal approach was not the procedure contemplated under Rule 12 of the Cenvat Credit Rules. On that basis, the appellant was treated as having made out a strong prima facie case, and full waiver of pre-deposit with stay of recovery was granted pending appeal.

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Issues: Whether the appellant had made out a prima facie case for waiver of pre-deposit and interim protection against recovery in a dispute concerning Cenvat credit on broken glass bottles, where compensation had been received from dealers.

Analysis: The order records that availing Cenvat credit on bottles broken after clearance from the factory was not disputed in principle, and that the demand was sustained only because compensation had later been received from dealers. It was noted that there was no provision showing that such subsequent compensation could, by itself, render the earlier credit wrongful. The order also found that there was no one-to-one correlation and that the pro rata reversal applied by the department was not the procedure contemplated under Rule 12 of the Cenvat Credit Rules.

Conclusion: The appellant established a strong prima facie case, and full waiver of the pre-deposit was granted with stay of recovery during the pendency of the appeal.

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