Modvat credit stay on Rule 57Q items allowed partially, with recovery of the balance suspended pending appeal

In a stay application on denial of Modvat credit under Rule 57Q, the tribunal examined whether the disputed items could be correlated with their nature, function and use in the manufacturing process. Because immediate co-relation was difficult on the available materials, relief was granted only for the items shown to be covered. Partial waiver was allowed, a partial deposit was directed, and recovery of the balance was stayed pending disposal of the appeal.

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Issues: Whether, in a stay application concerning denial of credit under Rule 57Q, partial waiver of the duty demand and stay of recovery could be granted pending hearing of the appeal.

Analysis: The disputed items required correlation between their nature, function, and place in the manufacturing process. In view of the materials placed and the difficulty in immediately co-relating all items with their nomenclature, relief was granted only to the extent of the items shown to be covered. A balance was struck by directing a partial deposit and staying recovery of the remaining amount till disposal of the appeal.

Conclusion: Partial stay and waiver was granted. The applicants were required to deposit Rs. 1,25,000 towards the duty confirmed, and recovery of the balance was stayed pending the appeal.

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