Modvat credit stay relief granted on a prima facie declaration dispute, subject to deposit or freezing condition.

Interim relief against recovery of disputed Modvat credit was justified where the appellants had already declared the input under Rule 57G and its use in manufacture, and the dispute concerned the applicable tariff entry for the input at the stay stage. The tribunal treated that prima facie position as sufficient for partial protection, while balancing the revenue interest by imposing a condition to freeze Modvat credit or deposit the specified amount in cash within one month. Recovery of the remaining demand was stayed subject to compliance with that condition.

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Issues: Whether the appellants were entitled to interim relief against recovery of the disputed Modvat credit demand, and whether such relief could be made conditional upon freezing or depositing a specified amount.

Analysis: The denial of Modvat credit was based on alleged non-disclosure of the chapter heading of inputs in terms of a trade notice. It was observed that, at the stage of stay, there could be a genuine dispute between the seller's and the purchaser-manufacturer's view of the tariff entry applicable to the input. On a prima facie view, declaration of the input under Rule 57G and its use in manufacture, as already reflected in the declaration, was considered sufficient to justify interim protection. The relief was balanced by directing the appellants to freeze Modvat credit to the extent of Rs. 30,000 or pay that amount in cash within one month.

Conclusion: Interim protection was granted in part, with waiver of the remaining demand and stay of recovery, subject to compliance with the directed deposit or freezing condition.

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