CENVAT credit on capital goods removed for manufacture can support stay of interest demand pending reversal dispute.

Rule 4(5)(b) of the CENVAT Credit Rules, 2004 permits removal of credit-availed capital goods to a job worker without reversal of credit, and on a prima facie view that facility could also extend to removal of capital goods to a supplier using them in manufacture for the assessee. The assessee therefore established a prima facie case against the interest demand arising from delayed reversal of credit, and waiver of pre-deposit with stay of recovery was granted.

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Issues: Whether waiver of pre-deposit and stay of recovery should be granted in respect of the interest demand arising from delayed reversal of credit on removal of capital goods.

Analysis: Rule 4(5)(b) of the CENVAT Credit Rules, 2004 permits removal of credit-availed capital goods such as jigs and fixtures to a job worker without requiring reversal of credit. On a prima facie view, the same facility could extend to removal of capital goods to a supplier of components who uses them in manufacture for the assessee. The appellant therefore established a prima facie case against the interest demand.

Conclusion: Waiver of pre-deposit and stay of recovery were justified and granted in favour of the assessee.

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