Waiver of pre-deposit in exemption dispute granted on bank guarantee where hardship and triable issues were shown.

Applicants seeking exemption for texturised yarn manufactured from imported base yarn raised an arguable dispute on the applicability of the exemption notification, supported by a Board circular and a subsequent amendment. The Tribunal treated the claim as triable, noted that prima facie mala fides were not shown, and accepted that a cash deposit would cause hardship. It therefore granted waiver of pre-deposit and stay of recovery on condition that the applicants furnish a bank guarantee, with liberty to seek early hearing.

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Issues: Whether, in the facts of the case, the applicants were entitled to stay of recovery and waiver of pre-deposit of duty and penalty on furnishing security instead of cash deposit.

Analysis: The applicants raised arguable questions on the applicability of exemption to texturised yarn manufactured from imported base yarn and relied on the Board circular and subsequent amendment to support their bona fide claim. The Tribunal also noted the plea that any duty paid would be recoverable by the main manufacturers through drawback and that the applicants had not acted with prima facie mala fides. At the same time, non-intimation to the Excise Department was not disputed and the exemption claim remained a triable issue. The financial material placed before the Tribunal showed that a cash deposit would cause hardship, so a secured arrangement was considered appropriate.

Conclusion: The applicants were granted waiver of pre-deposit and stay of recovery on furnishing a bank guarantee of Rs. 10 lakhs within the stipulated time, with liberty to seek early hearing.

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