Modvat credit reversal and pre-deposit waiver were denied where defective inputs were cleared as scrap without hardship shown.

Waiver of pre-deposit under the Modvat scheme was refused because the disputed goods were defective inputs cleared as scrap, and the demand was treated as a reversal of credit already enjoyed. No prima facie case was shown for stay of recovery, and the plea of limitation was rejected in light of the alleged irregular disposal of inputs. Financial hardship was also not established, as the record reflected substantial sales, production and realisations from the clearances. The applicants were therefore required to deposit the full duty demand before the appeal could proceed.

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Issues: Whether waiver of pre-deposit of the duty demand and stay of recovery were warranted pending the appeal.

Analysis: The applicants had taken Modvat credit on duty-paid inputs, but the disputed goods were deformed or defective inputs not used in or in relation to manufacture of the final product and were cleared as so-called scrap. On the material placed, the demand was viewed as a reversal of credit already enjoyed, and the Tribunal found no prima facie case. The plea of limitation was also rejected in view of the nature of the alleged irregular disposal of inputs under the Modvat scheme. Financial hardship was not established, as the record showed substantial sales, production, and realisations from the disputed clearances.

Conclusion: Waiver of pre-deposit and stay of recovery were refused; the full duty amount was required to be deposited.

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