CENVAT credit and exemption conditions supported waiver and stay against demands on capital goods and inputs cleared as such.

A prima facie case was found for waiver and stay of demands arising from denial of CENVAT credit on capital goods and duty on inputs cleared as such. The proviso to Notification No. 30/2004-C.E., read with the corrigendum, was applied to hold that the bar operated only where credit on inputs had been taken under the CENVAT Credit Rules, 2002. As no CENVAT credit on inputs was disputed, and the notification did not prohibit credit on capital goods, the capital goods demand was found prima facie unsustainable. The demand on inputs cleared as such was also held prima facie unsustainable, and the adjudged dues were stayed.

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Issues: Whether the appellant had made out a prima facie case for waiver and stay of the demands raised towards denial of CENVAT credit on capital goods and duty on inputs cleared as such.

Analysis: The demand relating to capital goods was traced to the proviso to Notification No. 30/2004-C.E. and the connected corrigendum. The appellant had switched over to the exemption regime and was clearing final products without payment of duty thereafter. The condition in the proviso barred the exemption only where credit of duty on inputs had been taken under the CENVAT Credit Rules, 2002. It was not disputed that no CENVAT credit had been availed on inputs, and the notification did not bar availment of credit on capital goods. A prima facie case was therefore made out against that demand. The demand of duty on inputs cleared as such was also found prima facie unsustainable.

Conclusion: The appellant was entitled to waiver and stay of the adjudged dues.

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