Debatable undertaking requirement and revenue neutrality justified waiver of pre-deposit and stay of recovery in a Modvat dispute.

In a stay application, the requirement of an undertaking for movement of yarn to job workers was treated as debatable, supporting waiver of pre-deposit and stay of recovery. The Tribunal also noted that the demand emerged from statutory records, that disallowance of Modvat credit was revenue neutral, and that the assessee had a prima facie case, including on limitation. On that basis, duty and penalty pre-deposit was waived and recovery was stayed pending disposal of the appeal.

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Issues: Whether, in a stay application, the assessee was entitled to waiver of pre-deposit of duty and penalty and stay of recovery, having regard to the disputed requirement of filing an undertaking for movement of yarn to job workers, the plea of revenue neutrality, and the plea on limitation.

Analysis: The order records that the controversy centred on whether an undertaking was required at the first stage of transfer of yarn to the job worker and, if so, before which authority it had to be filed. The issue was treated as debatable. The Tribunal also noted that the demand arose from statutory records and that the disallowance of Modvat credit was revenue neutral. On the material placed, the assessee was found to have a prima facie case, including on limitation.

Conclusion: The requirement of pre-deposit of duty and penalty was waived and recovery was stayed pending disposal of the appeal.

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