Modvat credit for components used with capital goods justified waiver of pre-deposit on a prima facie basis

Components and spares used with capital goods were treated as prima facie eligible for Modvat credit, even though they were classified under chapter headings not expressly covered by the capital goods definition. The Tribunal relied on the Board's circular clarifying that parts, components and accessories used with specified capital goods qualified for credit. On that basis, it found a prima facie case in favour of the applicants and held that the balance of convenience supported waiver of pre-deposit for hearing the appeal. Waiver of pre-deposit was granted accordingly.

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Issues: Whether waiver of pre-deposit of duty was justified on a prima facie view that the disputed components and spares were eligible for Modvat credit as capital goods or eligible inputs.

Analysis: The dispute concerned components and spares classified under chapter headings other than those specifically covered by the definition of capital goods, but used with capital goods falling under the relevant chapters. The Board's Circular No. 276/110/96-TRU dated 02-12-1996 clarified that parts, components and accessories used with capital goods of the specified clauses were eligible for Modvat credit. On that basis, the Tribunal found a prima facie case in favour of the applicants and held that the balance of convenience supported waiver of pre-deposit for hearing of the appeal.

Conclusion: Waiver of pre-deposit was granted in favour of the applicants.

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