Modvat credit and small scale exemption conflict led to stay of duty demand in a similar factual setting.

Stay was granted against a duty demand arising from alleged wrongful use of Notification No. 1/93 exemption while Modvat credit was also taken on clearances from the same unit. The applicants were using small scale exemption for their own-brand clearances and Modvat credit for clearances under another brand, while the demand turned on the notification condition that full exemption is unavailable where credit under Rule 57A is taken. For the stay application, the Tribunal treated the matter as identical to an earlier case with similar facts and followed that approach, resulting in interim relief for the applicants.

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Issues: Whether stay should be granted against the duty demand arising from alleged wrongful availment of Notification No. 1/93 exemption while also taking Modvat credit on clearances of the same unit.

Analysis: The applicants were availing small scale exemption for their own-brand clearances and Modvat credit for clearances under another brand. The demand rested on the notification condition that full exemption is not available where Modvat credit under Rule 57A is taken. For the purpose of the stay application, the Tribunal treated the case as identical to an earlier stay order in a similar factual setting, and followed that view.

Conclusion: Stay of the duty demand was granted in favour of the applicants.

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