Proportionate Cenvat credit reversal justified waiver of pre-deposit and stay of recovery in a service-tax dispute.

Proportionate reversal of Cenvat credit on common input services used for taxable and non-taxable services was treated as sufficient to establish a prima facie case for interim protection. As the applicants had already complied with the earlier adjudication order by reversing credit in relation to the non-taxable service, the tribunal found no immediate need for pre-deposit of the disputed demand, interest, and penalties. Pre-deposit was waived and recovery was stayed pending disposal of the appeals.

---

---

Issues: Whether the applicants made out a case for waiver of pre-deposit and stay of recovery in a dispute involving reversal of Cenvat credit on common input services used for taxable and non-taxable services.

Analysis: The applicants were shown to be reversing proportionate credit in relation to the non-taxable service, in line with the earlier adjudication order that had granted the benefit of Rule 6(3)(ii) of the Cenvat Credit Rules. In view of that earlier course of compliance, a prima facie case was found for interim relief. The disputed demand, interest, and penalties were therefore not directed to be deposited at this stage.

Conclusion: The pre-deposit was waived and recovery of the dues was stayed pending disposal of the appeals.

---