Revenue neutrality and prima facie case justified unconditional stay of pre-deposit in a Modvat credit dispute.

Entitlement to unconditional waiver of pre-deposit was supported by revenue neutrality and a prima facie case in a dispute over denial of Modvat credit on capital goods. The credit was alleged to have been taken in full in the second year instead of in two instalments, and reliance on a revised income-tax return was not accepted because the income-tax authorities had not yet decided the issue. The dispute was nevertheless treated as revenue neutral since any inadmissible credit could not be used to pay duty on final products, and clearances from Kutch were liable to refund under Notification No. 39/2001-CX. On that basis, unconditional stay of the pre-deposit requirement was granted.

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Issues: Whether the appellant was entitled to unconditional waiver of pre-deposit in view of revenue neutrality and a prima facie case.

Analysis: The demand arose from denial of Modvat credit on capital goods and the department's case was that the credit had been taken in full in the second year instead of being availed in two instalments. The claim based on the revised income-tax return was not accepted at this stage as no decision had been rendered by the income-tax authorities. However, the dispute was found to be revenue neutral because, if the disputed credit was unavailable, the appellant could not use it for payment of duty on final products and the goods cleared from the Kutch district were liable to refund under Notification No. 39/2001-CX. On that basis, the appellant was held to have a prima facie case.

Conclusion: The appellant was entitled to unconditional stay of the pre-deposit requirement.

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