Pre-deposit waiver and recovery stay granted on a strong prima facie case in a penalty dispute under excise rules.

Pre-deposit of penalties under Rule 173Q(1)(bbb) of the Central Excise Rules, 1944 was waived and recovery was stayed pending disposal of the appeals because a strong prima facie case was made out. The provision concerned wilful passing of ineligible credit with intent to defraud revenue, but the record showed the appellant was a second stage dealer and invoices during the relevant period were subject to partial physical control with authentication by the jurisdictional Superintendent. In that setting, it was considered unlikely that the invoices could have been authenticated without verification of records, and the retraction during cross-examination was not treated as an afterthought defeating interim protection.

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Issues: Whether pre-deposit of the penalties imposed under Rule 173Q(1)(bbb) of the Central Excise Rules, 1944 was required to be waived and recovery stayed pending disposal of the appeals.

Analysis: The penalty was imposed under a provision applicable where the assessee wilfully passes on ineligible credit with intent to defraud revenue. The record indicated that the appellant was a second stage dealer and that, during the relevant period, invoices issued by such dealers were under partial physical control, requiring authentication by the jurisdictional Superintendent. In these circumstances, it was considered unlikely that the invoices could have been authenticated without verification of records. The retraction of the statement during cross-examination was also not treated as an afterthought sufficient to defeat the request for interim protection. On this basis, a strong prima facie case was found for relief.

Conclusion: Pre-deposit of the penalties was waived and recovery was stayed till disposal of the appeals.

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