Modvat credit on structural materials was arguable, but complete waiver was refused and pre-deposit relief was made conditional.

Modvat credit on CTD bars, steel plates, angles and channels used in erection of structures was treated as an arguable dispute under Rule 57Q. The applicants claimed the items formed part of a blast furnace plant as capital goods, while the Revenue maintained that materials used in immovable structures were ineligible for credit. The Tribunal held that the dispute did not justify complete dispensation of pre-deposit and applied Section 35F to require the Modvat amount to be frozen in the capital goods Modvat account until disposal of the appeal, while dispensing with pre-deposit of the penalty and staying its recovery.

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Issues: Whether pre-deposit of the disputed Modvat credit demand and penalty should be waived in view of the arguable nature of the dispute under Rule 57Q.

Analysis: The dispute concerned Modvat credit on materials such as CTD bars, steel plates, angles and channels said to have been used in erection of structures. The applicants contended that the items formed part of a blast furnace plant and were covered as capital goods, while the Revenue relied on the view that materials used in immovable structures would not qualify for Modvat credit. The Tribunal found that the question was arguable, but not a fit case for complete dispensation of pre-deposit. It therefore invoked Section 35F and directed freezing of the Modvat amount in the capital goods Modvat account, with no utilisation until disposal of the appeal, while dispensing with pre-deposit of the penalty amount and staying recovery.

Conclusion: The request for complete waiver was rejected, but partial relief was granted by dispensing with pre-deposit of the penalty amount and staying recovery subject to the stated condition.

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