Pre-deposit under a stay order is not duty payment, so MODVAT credit under Rule 57E cannot be claimed.

A sum deposited only to comply with a conditional stay order pending appeal remains a pre-deposit and not payment of duty. On that basis, the buyer could not claim MODVAT credit under Rule 57E, because the deposit did not acquire the legal character of duty merely through departmental accounting treatment. The authorities cited by the assessee were distinguished on facts, and the court accepted that the amount would be refundable if the appeal succeeded. The assessee was therefore not entitled to a certificate under Rule 57E, and the respondents were required only to acknowledge the amount as a deposit towards duty.

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Issues: Whether amounts deposited pursuant to a conditional stay order pending appeal could be treated as payment of duty so as to entitle the assessee's buyer to MODVAT credit and to compel issuance of a certificate under Rule 57E.

Analysis: The dispute turned on the legal character of money paid under a stay-condition. The Court distinguished a voluntary payment of duty from a deposit made only to comply with an appellate pre-deposit order. It held that the former may support MODVAT credit, while the latter remains a deposit made pending appeal. The authorities relied on by the petitioner were distinguished on facts, and the Court accepted the revenue's position that departmental accounting treatment could not convert a deposit into duty payment. The Court also noted that, if the appeal succeeded, the amount would be refundable as a pre-deposit.

Conclusion: The petitioner was not entitled to a certificate under Rule 57E for MODVAT credit on the deposited amount, and the respondents were only bound to acknowledge it as a deposit towards duty.

Ratio Decidendi: A sum deposited only in compliance with a conditional stay order pending appeal is a pre-deposit and not payment of duty, and therefore it cannot, at that stage, be used to claim MODVAT credit under Rule 57E.

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