Modvat credit on staff residential construction services supported interim waiver of balance pre-deposit and stay for the assessee.

Modvat credit on input services used for construction of staff residential units was treated as prima facie admissible where the residential colony was argued to be intrinsically connected with manufacturing activity. The Tribunal noted conflicting High Court views but, at the interim stage, found the assessee's case sufficiently supported to justify waiver of the remaining pre-deposit. Taking into account the amount already deposited, it dispensed with the balance pre-deposit of duty, interest and penalty under Section 35F and granted stay in favour of the assessee.

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Issues: Whether, in the light of the prima facie view on admissibility of Modvat credit on input services used for construction of residential units for employees and the amount already deposited, the balance pre-deposit ought to be dispensed with.

Analysis: The appeal involved a demand confirmed by denying credit on input services relating to construction of staff residential units. The Tribunal noted that one High Court decision supported the assessee's case by treating the staff colony as intrinsically connected with manufacturing activity, while another decision took a contrary view. At the interim stage, the Tribunal treated the issue as prima facie covered in favour of the assessee. It also took note of the amount already deposited and considered it sufficient for the purposes of waiver of the remaining pre-deposit requirement under Section 35F.

Conclusion: The balance pre-deposit of duty, interest and penalty was dispensed with and stay was granted in favour of the assessee.

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