Arguable Modvat credit demand and substantial prior deposit justify waiver of pre-deposit and stay of recovery pending appeal.

Pre-deposit of duty and penalty may be dispensed with where part of the Modvat credit demand is arguable on the facts and substantial hardship is shown. The analysis notes that one set of credits related to inputs kept at another unit, with no allegation that those goods were used or diverted there, making that demand debatable; the diversion-related credit issue was not disputed. Because the applicants had already deposited a significant amount during investigation, the remaining pre-deposit was waived and recovery was stayed pending the appeals, while the earlier deposit was retained.

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Issues: Whether pre-deposit of the demanded duty and penalty should be dispensed with and recovery stayed pending disposal of the appeals in view of the nature of the alleged Modvat credit irregularities and the hardship pleaded by the applicants.

Analysis: The applications arose from demands raised on two grounds: credit taken on inputs said to have been received or kept in the premises of the other unit, and credit taken on inputs later diverted to the sister unit. The diversion aspect was not disputed, but the principal demand related to goods kept at the other unit while credit stood in the name of the applicant. On that issue, the absence of an allegation that the goods were used by the other unit or diverted to it made the matter arguable. The record also showed substantial sums already deposited during investigation, which was relevant to the plea of hardship.

Conclusion: Pre-deposit of the remaining duty and penalty was waived, the earlier deposit was to remain in place, and recovery of duty and penalty was stayed during the pendency of the appeals.

Ratio Decidendi: Where a substantial part of the demand is arguable on the facts and the applicant has already made a significant deposit, pre-deposit may be dispensed with and recovery stayed pending appeal to avoid undue hardship.

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