Common inputs and unreliable accounts justified only partial stay, with conditional pre-deposit required before appeal disposal.

Where common inputs are used for both dutiable and exempted products, the separate-account requirement is intended to prevent mixing of inputs and misuse of Cenvat credit. On the material considered, the maintained accounts were found prima facie unreliable and not properly co-relatable to the use of inputs for exempt goods. Total waiver of pre-deposit was therefore declined, but limited interim protection was granted on a conditional basis by directing a pre-deposit and staying the remaining duty, interest and penalty pending appeal.

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Issues: Whether, in the circumstances of common inputs being used for dutiable and exempted clearances, the applicant had made out a prima facie case for total waiver of pre-deposit and stay of recovery.

Analysis: The object of the rule requiring separate accounts is to prevent mixing of inputs meant for dutiable and exempted products and to guard against misuse of the Cenvat credit scheme. On the material before it, the Tribunal found prima facie that the accounts maintained by the applicant were not reliable or properly co-relatable with the actual use of inputs for exempted goods. At the same time, the submission that a large portion of credit had not been taken and that the balance position could justify partial relief was considered acceptable to a limited extent.

Conclusion: Total waiver of dues was declined, but the applicant was directed to deposit Rs. 65 lakhs and the balance of duty, interest and penalty was stayed till disposal of the appeal.

Final Conclusion: Interim relief was granted only in part, with a conditional pre-deposit requirement and stay of the remaining demand pending appeal.

Ratio Decidendi: Where common inputs are used for exempted and dutiable products and the maintained accounts are found prima facie unreliable, complete waiver of pre-deposit is not warranted, though partial stay may still be granted on a conditional basis.

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