Pre-deposit relief and stay in scrap-based excise dispute after bona fide belief supported a prima facie time-bar defence.

In a pre-deposit and stay application concerning duty and penalty on bars and rods made from old and unserviceable railway scrap, the Tribunal noted that earlier decisions had gone against assessees on the merits of exemption under Notification No. 202/88-C.E. The applicants, however, relied on CBEC circulars to support a bona fide belief that used and rejected railway materials were to be treated as angles, shapes and sections, and that the final product was exempt. On that basis, the demand was treated as prima facie time-barred, pre-deposit was dispensed with, and recovery was stayed pending appeal.

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Issues: Whether, in the circumstances of the case, the applicants were required to make pre-deposit of the duty and penalty, and whether recovery should be stayed pending appeal.

Analysis: The applicants were facing a demand of duty and penalty on the ground that bars and rods manufactured from old and unserviceable railway scrap were not eligible for the benefit of Notification No. 202/88-C.E. The question of merits had already been decided against assessees in earlier Tribunal decisions, but the applicants relied on Central Board of Excise and Customs circulars to show that they entertained a bona fide belief that used and rejected railway materials were to be treated as angles, shapes and sections and that the final product was exempt. On that basis, the demand was considered prima facie time-barred.

Conclusion: The requirement of pre-deposit of duty and penalty was dispensed with and recovery was stayed during the pendency of the appeal.

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