Pre-deposit waiver for SSI exemption dispute upheld where intermediate goods triggered a strong prima facie case against duty demand.

CESTAT Chennai held that the applicants had made out a prima facie case for waiver of pre-deposit and stay of recovery where duty and penalty were demanded after denial of exemption under Notification No. 67/95-CE on the ground that the final product was cleared under SSI exemption. The Tribunal noted that the applicants manufactured PP sacks and fabrics, with PP tapes or strips arising as an intermediate product, and that an identical issue had earlier been stayed on the basis of a strong prima facie claim. On that reasoning, further pre-deposit was found unwarranted at that stage and recovery of duty, interest, and penalty was stayed pending appeal.

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Issues: Whether the applicants had made out a prima facie case for waiver of pre-deposit and stay of recovery in relation to duty and penalty demand arising from denial of exemption under Notification No. 67/95-CE on the ground that the final product was cleared without payment of duty under SSI exemption.

Analysis: The applicants manufactured PP sacks and fabrics and availed SSI exemption under Notification No. 8/2003-CE. PP tapes or strips emerged as an intermediate product, and duty was demanded on the footing that Notification No. 67/95-CE applied only where the final product was dutiable. The Tribunal noted that an identical issue had earlier been stayed and that the underlying reasoning treated the dispute as giving rise to a strong prima facie claim. Following that view, the Tribunal found that the applicants had established a prima facie case against the demand and that further pre-deposit was not warranted at that stage.

Conclusion: Waiver of pre-deposit was granted and recovery of duty, interest, and penalty was stayed pending disposal of the appeal, in favour of the assessee.

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