Modvat credit on capital goods clarified as available on installation, supporting waiver of pre-deposit pending appeal.

Pre-deposit of duty was dispensed with pending appeal where Modvat credit on capital goods had been taken on receipt of the goods but utilised before installation. Rule 57Q was read as allowing credit on receipt in the factory while restricting utilisation until the goods were put to use, and the later notification was treated as prima facie clarificatory. The Modvat scheme's anti-cascading purpose supported the view that credit for capital goods of enduring life became available only on installation and use. As the machinery had since been installed and the credit had become available, the balance of convenience favoured waiver of pre-deposit.

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Issues: Whether pre-deposit of duty should be dispensed with pending appeal where Modvat credit on capital goods was taken on receipt of the goods but utilised before installation.

Analysis: The relevant rules were unamended when the credit was taken, and Rule 57Q was read as permitting credit on receipt of capital goods in the factory, while restricting utilisation until the goods were put to use. The later notification was treated as prima facie clarificatory. The Modvat scheme, intended to avoid cascading duty, was held to support the view that credit in respect of capital goods having long life became available only when the goods were installed and put to use, making the lower authority's interpretation prima facie correct. As the machinery had since been installed and the credit had become available, the balance of convenience favoured dispensing with pre-deposit during the pendency of the appeal.

Conclusion: Dispensation of pre-deposit of duty was granted in favour of the assessee pending appeal.

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