Modvat credit on capital goods: arguable prima facie case led to partial pre-deposit and stay of recovery.

Claims to Modvat credit on capital goods under Rule 57Q were treated as debatable, and the appellants were found to have only an arguable prima facie case for interim relief. On that basis, full waiver of pre-deposit was refused, partial pre-deposit was ordered, and recovery of the balance was stayed upon compliance with the deposit condition.

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Issues: Whether full waiver of pre-deposit and stay of recovery were warranted in appeals concerning denial of Modvat credit on capital goods under Rule 57Q of the Central Excise Rules, 1944.

Analysis: The disputed credit related to various items claimed as capital goods. The applicability of Rule 57Q to those items was treated as debatable, and the appellants were found to have shown only an arguable case, not a case justifying total dispensation of pre-deposit. In the circumstances, the Tribunal directed partial pre-deposit of Rs. 50 lakhs in all and granted stay of recovery of the balance on compliance.

Conclusion: Full waiver was refused. The appellants were required to make a partial pre-deposit, and recovery of the balance duty and penalty was stayed on compliance.

Final Conclusion: The interim relief was granted only in part, with a mandatory pre-deposit condition imposed before the appeals could proceed further.

Ratio Decidendi: Where the claim to Modvat credit on capital goods is only arguable and a prima facie case for total waiver is not made out, the Tribunal may order partial pre-deposit and stay recovery of the balance.

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