Modvat credit lapses on opting out of the scheme, but financial hardship may justify partial waiver of pre-deposit.

On opting out of the Modvat Scheme, credit standing in the assessee's account was treated as prima facie lapsed and not available for later utilisation for duty payment on subsequent clearances. The Tribunal therefore found no prima facie right to retain and use the credit after exit from the scheme, but considered the appellants' financial hardship and the surrounding circumstances in deciding pre-deposit relief. Partial waiver was granted: the appellants were directed to deposit Rs. 40,000, while pre-deposit of the balance was dispensed with subject to compliance.

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Issues: Whether, on an application for dispensation of pre-deposit, the appellants were entitled to retain and utilise Modvat credit standing in their account after opting out of the Modvat Scheme, and whether any prima facie case justified waiver of the balance pre-deposit.

Analysis: The appellants had admittedly opted out of the Modvat Scheme and used the credit standing in their books for duty payment on goods manufactured thereafter. The Tribunal noted its earlier view that credit standing in the account on the date of opting out lapses and cannot later be utilised. On that basis, and at the prima facie stage, it found no infirmity in the lower authority's view that the credit could not survive for later utilisation. At the same time, the Tribunal took note of the appellants' financial difficulty and the circumstances of the case while considering the extent of pre-deposit relief.

Conclusion: The appellants were not shown to have a prima facie right to utilise the lapsed Modvat credit after opting out of the scheme, but partial waiver of pre-deposit was granted. The appellants were directed to pre-deposit Rs. 40,000, and pre-deposit of the balance was dispensed with, subject to compliance.

Final Conclusion: The application for waiver of pre-deposit was allowed only to a limited extent, with partial deposit ordered and stay granted for the remaining demand pending appeal.

Ratio Decidendi: On opting out of the Modvat Scheme, the credit standing in the assessee's account prima facie lapses and cannot be treated as available for subsequent utilisation; waiver of pre-deposit depends on the circumstances shown for relief.

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