Pre-deposit waiver in DEEC scheme penalty dispute declined where unexplained shortage of imported raw material remained unrebutsed.

In a penalty matter arising from shortage of duty-free imported raw material under the DEEC scheme, the Tribunal held that full waiver of pre-deposit was not justified because the applicants had not satisfactorily accounted for the imported material or rebutted the recorded shortage. The asserted export obligation compliance and inter-transfer of inputs between advance licences were not enough at the interim stage, although the construction of the notification was left for examination in the appeal. Full waiver was declined, and the applicants were required to deposit Rs. 2 lakh, after which recovery of the remaining penalty was stayed.

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Issues: Whether the applicants were entitled to full waiver of pre-deposit and stay of recovery of the penalty pending appeal.

Analysis: The application arose from a penalty imposed for shortage of duty-free imported raw material under the DEEC scheme. Although the applicants asserted fulfilment of export obligation and inter-transfer of inputs between advance licences, the material placed before the Tribunal did not satisfactorily establish accountal of the imported raw material or rebut the recorded shortage. The Tribunal noted that the issue regarding interpretation of the notification would be examined at the appeal stage, but at the interim stage the unexplained shortage remained a relevant consideration.

Conclusion: Full waiver was declined; the applicants were directed to deposit Rs. 2 lakh and, on such deposit, recovery of the remaining penalty was stayed.

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