CENVAT credit use without one-to-one input-output correlation supported prima facie relief and stay of recovery.

The CENVAT credit scheme was interpreted as permitting credit of duty paid on inputs to be used for payment of duty on final products without requiring a one-to-one correlation between a specific input and a specific output. On a prima facie reading of Rule 3 and in light of earlier Tribunal decisions, credit of duty paid on molasses was considered usable towards duty on sugar. The assessee therefore established a prima facie case for interim relief, and unconditional waiver of pre-deposit with stay of recovery was granted.

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Issues: Whether duty paid on molasses could be utilized for payment of duty on sugar under the CENVAT Credit Rules without one-to-one correlation between input and output, and whether the appellant had made out a case for waiver of pre-deposit and stay of recovery.

Analysis: The credit scheme under Rule 3 permitted credit of duty paid on inputs and its utilization for payment of duty on any final products. The Tribunal held, on a prima facie reading of the scheme, that sub-rule (3) did not require a one-to-one correlation between a particular input and a particular output. The reliance placed on earlier Tribunal decisions supported this view, and the appellant therefore established a prima facie case for interim relief.

Conclusion: The utilization of credit of duty paid on molasses for payment of duty on sugar was held to be prima facie permissible, and unconditional waiver of pre-deposit with stay of recovery was granted in favour of the assessee.

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