Retrospective validation of lapsing Modvat credit defeated prima facie claim to full pre-deposit waiver.

Retrospective amendment under the Central Excise framework was treated as validating rules that mandate lapsing and non-utilisation of unutilised Modvat credit under the compounded levy scheme, so the appellants could not claim a prima facie right to use that credit after the special levy regime ended. Prior decisions relied on to support utilisation were considered unavailable in light of the amended statutory position. On that basis, no complete waiver of pre-deposit was granted, and only a partial pre-deposit was directed.

---

---

Issues: Whether waiver of pre-deposit should be granted in respect of the disputed Modvat credit and penalty in view of the retrospective amendment empowering lapsing and non-utilisation of credit under the compounded levy scheme.

Analysis: The disputed credit was governed by Rule 57F(17)(c) of the Central Excise Rules, 1944, which provided for lapsing of credit and bar on its utilisation. Section 37 of the Central Excise Act, 1944 had been retrospectively amended to confer power on the Government to make rules for lapsing of unutilised credit and for prohibiting its use for duty payment. In view of that statutory framework, the claim that credit could be used after the compounded levy scheme ended was not accepted. The plea based on prior decisions was treated as unavailable after the retrospective amendment, and the appellants were held not to have made out a prima facie case for complete waiver.

Conclusion: Waiver of the full pre-deposit was refused, and the appellants were directed to make a pre-deposit of Rs. 5 lakhs.

Ratio Decidendi: Where a retrospective amendment validly authorises rules for lapsing and non-utilisation of credit, a manufacturer cannot claim a prima facie entitlement to use such credit after the special levy scheme has ended.

---