Prima facie inapplicability of penalty provisions justified waiver of pre-deposit and stay of recovery in excise appeal

A prima facie case for waiver of pre-deposit arose where penalty was imposed on a registered dealer under penalty provisions that appeared inapplicable to its role, since it neither took nor utilised credit and no duty liability was cast on it. The show cause notice also failed to specify the precise sub-clause invoked, and the applicants contended that one cited sub-rule was not in force during the relevant period. On these facts, the tribunal treated the penalty as doubtful at the interim stage and granted stay of recovery pending appeal.

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Issues: Whether the appellants had made out a prima facie case for waiver of pre-deposit and stay of recovery in view of the apparent inapplicability of the penal provisions under which penalty had been imposed.

Analysis: The penalty on the first applicant was imposed under Rule 173Q(i)(bb) and Rule 173Q(i)(d) of the Central Excise Rules, although the first applicant was only a registered dealer who neither took nor utilised credit and on whom no duty liability was cast. The order also noted that the show cause notice did not specify the precise sub-clause invoked, while the applicants had pointed out that Rule 173Q(i)(bbb) was not applicable during the relevant period and that the Commissioner would have agreed with that contention if penalty had been proposed under that sub-rule. On these facts, a prima facie case was found in favour of the appellants.

Conclusion: Pre-deposit of the penalties was waived and recovery was stayed during the pendency of the appeals.

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