Cenvat credit reversal and ADB-funded supplies: exemption treatment created a prima facie case for unconditional stay.

Supplies made to projects funded by the Asian Development Bank were treated as exempt under the relevant notification, on the basis that the Bank qualified as an international organisation. The dispute concerned whether, for Rule 6 of the Cenvat Credit Rules, the same supplies were nevertheless outside the exception to reversal of Cenvat credit. As the exemption benefit had already been extended on the footing that the Asian Development Bank was an international organisation, the applicant was found to have a prima facie strong case. Unconditional stay of the demand was therefore granted.

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Issues: Whether the applicant was entitled to unconditional stay in respect of the demand raised on the footing that supplies made to projects funded by the Asian Development Bank were not covered by the exception to reversal of Cenvat credit under Rule 6 of the Cenvat Credit Rules.

Analysis: The applicant had cleared goods under exemption notification for supplies to projects funded by the Asian Development Bank. The dispute arose because one view treated the Asian Development Bank as an international organization for the purpose of the exemption notification, while another view denied the benefit of the exception from reversal of credit under Rule 6 of the Cenvat Credit Rules on the premise that it was not an international organization. Since the benefit under the exemption notification had already been extended on the footing that the Asian Development Bank was an international organization, a prima facie strong case was made out for the applicant.

Conclusion: Unconditional stay was granted in favour of the applicant.

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