Modvat credit dispute: subsequent acceptance on identical facts supported waiver of pre-deposit pending appeal.

Subsequent departmental acceptance on identical facts can establish a strong prima facie case for interim relief in a Modvat dispute. Here, the applicants claimed Modvat credit on inputs after the product was treated as a by-product, and the adjudicating authority later accepted that position for a later period under Rule 57D of the Central Excise Rules, 1944. On that basis, the balance of convenience favoured relief, and waiver of pre-deposit of the duty demand and penalty was granted pending the appeal.

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Issues: Whether the applicants were entitled to waiver of pre-deposit of the duty demand and penalty in a case where Modvat credit on inputs was denied on the ground that the product was a final product exempt from duty.

Analysis: The application for stay was considered against the background that, for a subsequent period on the same issue, the adjudicating authority had accepted the applicants' claim that di-calcium phosphate was a by-product and had allowed Modvat credit on inputs under Rule 57D of the Central Excise Rules, 1944. In view of this subsequent acceptance on identical facts, the applicants established a prima facie case. The balance of convenience, therefore, favoured grant of interim relief pending disposal of the appeal.

Conclusion: The applicants were entitled to waiver of pre-deposit of the duty and penalty for hearing of the appeal.

Ratio Decidendi: Where subsequent departmental acceptance on the same issue shows a strong prima facie case, pre-deposit may be waived on the balance of convenience.

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