Retrospective exemption under the MODVAT scheme supported prima facie relief against duty recovery and penalty.

Retrospective exemption and the MODVAT-based exemption scheme were treated as sufficient to justify interim relief against recovery of duty demand and penalty. The appellants relied on later exemption notifications covering captively consumed inputs and on the retrospective operation of the amended framework; in that stay context, the earlier approved classification list and missing records were not treated as decisive. Applying the view that a demand should not be enforced where retrospective legislation alters the duty position, CEGAT found a prima facie case and granted unconditional stay with waiver of recovery.

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Issues: Whether unconditional stay and waiver of recovery of the duty demand and penalty were warranted in view of the retrospective exemption and MODVAT-related exemption scheme.

Analysis: The appellants relied on the retrospective operation of the exemption framework and the later notification granting exemption for captively consumed inputs covered by the MODVAT scheme. The earlier approved classification list and the absence of records were not treated as decisive against them in the stay context, since the demand arose from a regime later altered by retrospective legislation. The reasoning followed the earlier view that a demand cannot be enforced where a subsequent notification maintaining the duty position is covered by retrospective legislation.

Conclusion: The appellants made out a prima facie case for relief, and unconditional stay with waiver of recovery of both duty and penalty was granted.

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