Prospective application of Modvat reconciliation circular denied stay relief against excess credit demand

At the stay stage, the Tribunal found no basis to suspend recovery of excess Modvat credit because the appellants had admittedly taken credit beyond the duty actually paid on the inputs covered by the challans. The departmental circular dealing with reconciliation of stockyard and depot quantities was not applied retrospectively, as the scheme was treated as operating prospectively for the relevant period. On that footing, the Tribunal saw no infirmity in the orders of the lower authorities and held that the appellants had not made out a case for stay. Stay relief was therefore declined, and the demanded deposit was upheld prima facie.

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Issues: Whether, at the stay stage, the appellants were entitled to relief against the demand of excess Modvat credit and whether the departmental circular could be applied retrospectively to shift liability away from them.

Analysis: The appellants had admittedly availed Modvat credit in excess of the duty actually paid on the inputs covered by the challans. The reliance placed on the circular providing for reconciliation of stockyard and depot quantities was not accepted for the relevant period because the scheme was held to operate prospectively. On that basis, the Tribunal found no infirmity in the orders of the lower authorities and held that the appellants had not established a case for stay.

Conclusion: The appellants were held liable, at least prima facie, to make the demanded deposit, and stay relief was declined.

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