Prima facie waiver of pre-deposit may follow where goods receipt, limitation, and Rule 26 penalty ingredients are unproved.

In stay proceedings, waiver of pre-deposit may be justified where the record prima facie supports receipt of goods under dealer invoices, payment by account payee cheque, statutory entries, and use in manufacture, and no direct material shows non-movement of goods or suppression. On that basis, denial of Modvat credit was not required to be secured at the interim stage, and the limitation objection was prima facie sustainable. Penalties under Rule 26 likewise require prima facie material showing the necessary involvement in transportation or sale of goods liable to confiscation; where those ingredients are not shown, pre-deposit of penalty may also be dispensed with.

---

---

Issues: (i) Whether, in a stay application, the appellant had made out a prima facie case for waiver of pre-deposit against a demand confirming denial of Modvat credit on invoices issued by registered dealers and whether the demand was prima facie barred by limitation; (ii) Whether penalties imposed under Rule 26 were prima facie sustainable.

Issue (i): The appellant had shown receipt of goods under dealer invoices, payment by account payee cheques, corresponding entries in statutory records, and use of the goods in manufacture. There was no transporter statement or other direct material showing that the goods had not moved from the dealers' premises to the appellant's factory. On the material then available, the allegation that the dealers had not received the inputs could not, by itself, justify confirmation of demand against the appellant. The absence of evidence of suppression or misstatement also supported the plea of limitation.

Conclusion: The demand against the appellant was not required to be secured by pre-deposit at the interim stage, and the limitation objection was prima facie sustainable.

Issue (ii): Penalties under Rule 26 depended on the alleged involvement in transportation or sale of goods liable to confiscation. On the Revenue's own case, the goods were not shown to have been transported or sold in the manner necessary to attract that provision. Prima facie, the ingredients for invoking Rule 26 were not established.

Conclusion: The penalties under Rule 26 were not required to be secured by pre-deposit at the interim stage.

Final Conclusion: The stay applications were allowed unconditionally, and pre-deposit of duty and penalties was dispensed with.

Ratio Decidendi: In a stay proceeding, when the record does not prima facie establish non-receipt of goods by the buyer or the statutory ingredients for penalty, and there is no supporting material of suppression, pre-deposit may be waived.

---