Prima facie clandestine removal and arguable Cenvat credit disputes shaped partial waiver of pre-deposit at the stay stage

At the stay stage, a categorical confirmation by the recipient that the full invoiced quantity was received supported a prima facie case of clandestine removal, so no waiver was granted on that component. By contrast, the undervaluation and Cenvat credit disputes were found to raise arguable merit: freight and insurance were shown to match the contractual amount, the packing classification issue did not then justify differential duty, and the inputs and capital goods credit objections were treated as limited and not fully established. The result was only partial relief from pre-deposit, with a substantial amount required and the remainder kept in abeyance pending compliance.

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Issues: (i) whether the demand relating to alleged clandestine removal disclosed a prima facie case for insistence on pre-deposit; (ii) whether the demands based on undervaluation and denial of Cenvat credit on inputs and capital goods justified full waiver of pre-deposit.

Issue (i): whether the demand relating to alleged clandestine removal disclosed a prima facie case for insistence on pre-deposit

Analysis: The receiver of the goods was stated to have categorically confirmed receipt of the entire invoiced quantity and to have denied receipt of any subsequent quantity. On that basis, the documentary record was treated as corroborated by the statements of the recipient, supporting the charge that the balance quantity was not later supplied as claimed.

Conclusion: The clandestine removal demand was held to be established prima facie, and no waiver was granted on that component.

Issue (ii): whether the demands based on undervaluation and denial of Cenvat credit on inputs and capital goods justified full waiver of pre-deposit

Analysis: The amount recovered towards freight and insurance was shown to correspond to the contractual amount, and the substitution of packing in some invoices did not appear, at the stay stage, to justify treating the entire amount as packing charges for differential duty. The denial of Cenvat credit on inputs was also found to raise a prima facie case for waiver, since the appellant had paid service tax on installation and erection services and the record did not show that the inputs were not used for providing services. The dispute regarding capital goods credit was treated as involving only a limited amount.

Conclusion: The appellant was found to have made out a prima facie case on the undervaluation and Cenvat credit issues, warranting partial relief from pre-deposit.

Final Conclusion: The demand was not stayed in full and the appellant was required to make a substantial pre-deposit, with the balance of the adjudicated liability kept in abeyance pending compliance.

Ratio Decidendi: At the stay stage, a recipient's categorical confirmation of full invoiced receipt can substantiate a prima facie case of clandestine removal, while separate components of the demand may still justify partial waiver where the record shows arguable merit.

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