Fraudulent Cenvat credit on unpaid-duty inputs led to only partial waiver of pre-deposit and conditional stay.

Cenvat credit on inputs for captive consumption was treated as prima facie fraudulent where the invoices showed duty that had not actually been paid. The tribunal noted that no NCCD had been paid on the inputs and that any credit, if otherwise available, could be utilised only in accordance with Rule 3(7) of the Cenvat Credit Rules, 2002. Financial hardship was considered, but the balance sheet showed sufficient current assets. Partial waiver of pre-deposit was therefore granted, subject to deposit of the specified amount, with waiver of the balance demand and stay of recovery on compliance.

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Issues: Whether the appellant was entitled to waiver of pre-deposit and stay of recovery, and whether it had made out a prima facie case regarding the availment and utilisation of NCCD credit on inputs used for captive consumption.

Analysis: The credit was taken on invoices showing duty on inputs that had not actually been paid. The arrangement was treated as prima facie artificial and dubious, and the credit was held to have been taken fraudulently. It was also noted that, on the facts, no NCCD had been paid on the inputs and that credit, even if available, could be utilised only in accordance with Rule 3(7) of the Cenvat Credit Rules, 2002. Financial hardship was considered, but the balance sheet showed sufficient current assets to meet the demand.

Conclusion: The appellant was not entitled to total waiver of pre-deposit. Partial relief was granted by directing deposit of Rs. 1,50,00,000 within eight weeks, with waiver of the balance duty and penalty and stay of recovery subject to compliance.

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