Cenvat credit utilisation condition under Notification No. 56/02 supported interim stay of a refund order.

Notification No. 56/02 was read as requiring a manufacturer to first utilise the entire available Cenvat credit standing at the end of the month for payment of duty on clearances during that month, and to pay only any balance in cash. On the facts noted, a balance remained in the Cenvat account at month-end, yet duty had been paid through PLA and refund was claimed. The Tribunal treated this as raising a prima facie issue under the notification condition and granted stay of the impugned refund order, allowing the stay petition.

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Issues: Whether stay of operation of the impugned order granting refund was justified in view of the condition in Notification No. 56/02 requiring prior utilisation of the entire available Cenvat credit for payment of duty.

Analysis: The application for stay was founded on the allegation that refund had been allowed contrary to the notification condition. The relevant condition required the manufacturer to first utilise the whole of the Cenvat credit available on the last day of the month for payment of duty on clearances during that month and to pay only the balance in cash. On the facts placed before it, the Tribunal found that there was still a balance in the Cenvat account at the end of the month, yet duty had been paid through PLA and refund was sought, which made the matter fit for interim protection.

Conclusion: Stay of the impugned order was granted and the stay petition was allowed.

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