Modvat credit dispute leads to stay of recovery pending final disposal, with no pre-deposit required.

Modvat credit was examined in relation to whether it should be limited to the effective duty actually payable on inputs. The record showed that duty on the seized goods had been paid at tariff rate for provisional release, and it did not appear to be a mere deposit pending quantification. As the question whether duty had been avoided by fraud remained open, the demand based on excess Modvat credit was not treated as requiring immediate recovery. The stay application was therefore allowed with unconditional relief, and recovery of the confirmed amount was stayed without pre-deposit pending final disposal of the appeal.

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Issues: Whether Modvat credit was to be restricted to the effective duty payable on the inputs, and whether recovery of the confirmed amount should be stayed pending final hearing.

Analysis: The duty on the seized goods had been deposited as duty at the tariff rate for provisional release, and the record did not indicate that the amount was merely a deposit awaiting quantification. The issue whether the duty had been avoided by fraud was still open. In these circumstances, the demand raised on the basis of excess Modvat credit was not treated as warranting immediate recovery, and the stay application was considered fit for unconditional relief.

Conclusion: Recovery of the confirmed amount was stayed without pre-deposit pending final disposal of the appeal.

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