Cenvat credit reversal for exempted goods supported waiver of pre-deposit of duty and penalty at the interim stage.

Reversal of Cenvat credit attributable to inputs used in exempted clearances was treated as giving the assessee a strong prima facie case under Rule 6(3)(a) of the Cenvat Credit Rules, 2004. On that basis, the demand was not considered a proper ground to insist on pre-deposit of duty and penalty at the interim stage, and waiver of the pre-deposit was granted.

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Issues: Whether waiver of pre-deposit of duty and penalty was justified where credit taken on inputs used in manufacture of exempted goods had been reversed and the assessee relied on Rule 6(3)(a) of the Cenvat Credit Rules, 2004.

Analysis: The applicant had reversed the Cenvat credit attributable to inputs used in the exempted clearances. The order records that this gave the applicant a strong prima facie case under Rule 6(3)(a), and therefore the demand was not a proper ground to insist on pre-deposit at this stage.

Outcome: Waiver of duty and penalty pre-deposit was granted and the stay petition was allowed.

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