Revenue-neutral Modvat credit dispute justified unconditional stay where duty on intermediate fabric was prima facie creditable against final product duty.

Modvat credit was held prima facie available on duty paid on bleached fabric for use against duty on the dyed final product under Notification No. 24/94-C.E., making the dispute revenue neutral. On that basis, the Tribunal treated the demand as a paper exercise with no real revenue impact and granted unconditional stay, dispensing with pre-deposit.

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Issues: Whether the appellant was entitled, prima facie, to Modvat credit on duty paid on bleached fabric and whether the demand warranted unconditional stay on the ground that the exercise was revenue neutral.

Analysis: The appellant's case was that, even if duty was payable on the bleached fabric, credit of such duty would be available for utilisation against duty on the dyed fabric under the relevant notification. The Tribunal found prima facie force in this contention and held that the appellant would be entitled to Modvat credit of the duty paid on the bleached fabric, if any, under Notification No. 24/94-C.E. Since the credit would offset the duty liability, the proceedings were treated as a paper exercise with no real revenue impact.

Conclusion: The stay petition was allowed unconditionally in favour of the appellant.

Ratio Decidendi: Where duty paid at an intermediate stage is prima facie available as credit against duty on the final product, the dispute is revenue neutral and pre-deposit may be dispensed with.

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