CENVAT credit on standby transformers supplied during repairs supported full waiver of pre-deposit and stay of recovery.

Rule 16 of the CENVAT Credit Rules, 2002 was applied to credit taken on standby transformers supplied during repairs of transformers returned by customers. The appellant argued, on the basis of precedent, that credit was admissible on returned finished goods and sought waiver of pre-deposit and stay of recovery against the duty demand. The Tribunal accepted that a prima facie case had been made out on this issue and granted full interim relief, allowing 100% waiver of pre-deposit and stay of recovery pending the appeal.

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Issues: Whether the appellant was entitled to waiver of pre-deposit and stay of recovery in respect of the demand arising from availment of CENVAT credit on standby transformers returned to the factory.

Analysis: The appellant was manufacturing transformers and, in the course of business, supplied standby transformers during repairs of transformers returned by customers. The appellant relied on Rule 16 of the CENVAT Credit Rules, 2002 and on precedent to contend that credit could be taken on returned finished goods. Accepting that reliance, the Tribunal found that a prima facie case was made out for grant of full stay.

Conclusion: The appellant was entitled to 100% waiver of pre-deposit and stay of recovery during the pendency of the appeal.

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