Suo motu Cenvat credit and penalty pre-deposit: partial waiver granted, with reduced deposit ordered and balance stayed.

Suo motu availment of Cenvat credit was treated as impermissible, even though the appellant later reversed the credit with education cess and interest. The Tribunal accepted the plea of bona fide belief only to the extent that the record disclosed a prima facie case on penalty, but not enough to justify complete waiver of pre-deposit. Partial waiver was therefore granted, a reduced amount was directed to be deposited towards penalty, and the balance was stayed subject to compliance with the pre-deposit order.

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Issues: Whether the appellant was entitled to waiver of pre-deposit of the penalties imposed for suo motu availment of Cenvat credit and whether a reduced pre-deposit should be ordered on the facts of the case.

Analysis: The appellant had taken Cenvat credit on service tax paid on its own understanding of the taxability of the activity, and later reversed the credit with education cess and interest. The Tribunal held that suo motu availment of Cenvat credit was not permissible, but noted the plea of bona fide belief and found that the matter disclosed a prima facie case for imposition of penalty. In view of that prima facie assessment, complete waiver was declined and a partial pre-deposit was directed.

Conclusion: Partial waiver of pre-deposit was granted and the appellant was directed to deposit a reduced amount towards penalty, with the balance stayed.

Final Conclusion: The stay applications were allowed only to the extent of partial waiver, and the penalties were kept in abeyance subject to compliance with the ordered pre-deposits.

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