Prima facie eligibility of Modvat credit on capital goods led to partial pre-deposit relief and stay of balance demand.

In a stay application concerning Modvat credit and penalty, the Tribunal found a prima facie case for credit on Transformers, Static Converters, Conduit PVC Arm Cable, and Final Washing Assembly/HCL Tail Gas Assembly as capital goods. Credit on resins, Bakelite sheets, and M. Seal was treated as debatable and left for detailed examination at final hearing. Balancing the equities, the Tribunal ordered deposit only of the amount attributable to the disputed items where no prima facie case was shown, and stayed the balance duty and penalty pending appeal after compliance.

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Issues: Whether, in the stay application, the applicants had made out a prima facie case for waiver of full pre-deposit of the disputed Modvat credit and penalty, and whether the credit relating to certain items was prima facie admissible as capital goods.

Analysis: The Tribunal found prima facie force in the claim that credit was admissible on Transformers, Static Converters, Conduit PVC Arm Cable, and Final Washing Assembly/HCL Tail Gas Assembly. It treated eligibility of credit on resins, Bakelite sheets, and M. Seal as debatable and requiring detailed examination at the final hearing. On that basis, it balanced the equities by directing deposit only of the credit attributable to the disputed items other than those for which a prima facie case was found.

Conclusion: Partial waiver of pre-deposit was granted. The applicants were directed to deposit Rs. 27,017/- and, upon compliance, the balance duty and penalty were stayed pending appeal.

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