Exemption conditions and Modvat reversal at clearance led to only partial stay relief and a pre-deposit requirement.

In a stay application over duty demand under Notification No. 202/88, the Tribunal held prima facie that exemption was not established at the time of clearance because Modvat credit on the relevant inputs had been taken and was reversed only after the exempted goods were cleared. It distinguished the Supreme Court ruling relied on by the applicants and found that the condition for exemption was therefore not satisfied on the facts presented. Considering the financial position and the duty computation dispute, it granted only partial interim relief and ordered a substantial pre-deposit with security for the balance.

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Issues: Whether, in a stay application concerning duty demand under Notification No. 202/88, the applicants were entitled to waiver of pre-deposit or only partial relief where Modvat credit on the relevant inputs had been reversed after clearance of the exempted goods.

Analysis: The Tribunal noted that Modvat credit had been taken on the inputs used in manufacture and that, at the time the tubes were cleared under exemption, the credit relatable to those inputs had not yet been reversed. It held prima facie that the condition for availing the benefit of the exemption notification was not satisfied at the point of clearance, and distinguished the reliance placed on the Supreme Court ruling cited by the applicants. While considering the financial position and the submissions on the manner of calculation of duty, the Tribunal moulded interim relief by directing a substantial pre-deposit and security for the balance.

Conclusion: The applicants were granted only partial stay relief and were directed to make a 50% pre-deposit with bank guarantee for the balance.

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