CENVAT credit on returned inputs: prima facie no duty payable on return to the original supplier, with interim stay granted.

On a prima facie view, returned inputs that were originally cleared by the supplier without payment of excise duty and on which no CENVAT credit had been taken did not appear to require duty payment by the assessee when the goods were returned to the original supplier. The Tribunal considered the assessee's reliance on an earlier precedent and the overall facts before granting interim relief. It directed a cash deposit of 7.5% of the duty demanded within eight weeks and stayed recovery of the remaining duty, interest and penalty upon compliance.

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Issues: Whether, on a prima facie view, the assessee could discharge duty on returned inputs by utilising accumulated CENVAT credit and whether recovery of the balance demand should be stayed pending compliance with a conditional deposit order.

Analysis: The goods in dispute were inputs originally cleared by the supplier without payment of excise duty, and no CENVAT credit had been taken at that stage by the assessee. The Tribunal held that, in such circumstances, the assessee was not the manufacturer of the goods in dispute and it appeared prima facie that there was no necessity to pay duty on the return of the goods to the original supplier. It also noted the contention regarding the earlier Tribunal view cited by the assessee and considered the overall facts of the case before granting interim relief.

Conclusion: The assessee was directed to deposit 7.5% of the duty demanded in cash within eight weeks, and recovery of the balance duty, interest and penalty was stayed on such compliance.

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