MODVAT credit on capital goods under Rule 57Q supports waiver of pre-deposit and recovery stay

Waiver of pre-deposit and stay of recovery was granted in a dispute over MODVAT credit on goods claimed as capital goods under Rule 57Q of the Central Excise Rules, 1944. The items were examined on a prima facie basis by reference to their use in the factory during the relevant period, and were found capable of falling within the definition of capital goods. The Board's circular was treated as having no prima facie significance because the controlling question was whether the goods satisfied Rule 57Q on the facts of their use. The appellant therefore obtained interim protection against recovery.

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Issues: Whether the appellant was entitled to waiver of pre-deposit and stay of recovery in respect of the disputed MODVAT credit claimed on the goods treated as capital goods under Rule 57Q of the Central Excise Rules, 1944.

Analysis: The dispute related to the period November 1994 to December 1995. The goods in question were claimed as capital goods and the appellate authority had examined their manner of use in the factory. The Board's circular was treated as of prima facie no significance because the controversy turned on whether the goods fell within the scope of capital goods under Rule 57Q as applicable during the material period. On a prima facie appraisal of the use of the items, the goods were found capable of being brought within the definition of capital goods.

Conclusion: The appellant was entitled to waiver of pre-deposit and stay of recovery.

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