Judgment:
1. The applicants are manufacturers of steel ingots etc. falling under chapter 72 of Central Excise Tariff Schedule. Till 31.07.97, they were availing the facility of Modvat credit on inputs under 57A of the Central Excise Rules. With effect from 01.08.97, they are covered by the Compounded Levy Scheme under Section 3A of the Central Excise Act, whereunder they have a liability to pay duty of excise on the basis of the annual capacity of production (ACP) as determined by the competent authority under the relevant rules framed under Section 3A ibid.
Sometime in July 1997, the applicants had taken Modvat credit to the extent of Rs.1,47,319/- on certain quantity of inputs under Rule 57A.That quantity of the inputs happened to be used for manufacture of final products after the applicants came under the Compounded Levy Scheme. The Department took the stand that any Modvat credit taken on inputs so used must be reversed. Therefore, they raised a demand on the applicants by invoking the provisions of Rule 57H(7) read with those of Rule 57F(17) of the Central Excise Rules. The demand was contested by the applicants. The Assistant Commissioner, who adjudicated the dispute, held that the Modvat credit taken as above was not liable to be reversed. The Department was not satisfied with that decision, which was therefore reviewed by the Commissioner, pursuant to which an appeal was preferred to the Commissioner (Appeals). The lower appellate authority reversed the decision of the AC and held that the above Modvat credit was liable to be reversed. Hence the appeal of the assessees before the Tribunal and the present application praying for waiver of pre-deposit of the duty amount and for stay of recovery there of.
2. Carefully examined the records and heard both sides. Ld. Chartered Accountant Shri Pankaj Mullick submits that neither under Rule 57H (7) nor under Rule 57F(17) is there any requirement that any Modvat credit taken on any quantity of inputs carried over from Modvat scheme to manufacturing activity under the Compounded Levy Scheme has to be reversed int he modvat account. He, further, submits that 57H(7) is not at all applicable to a case like this. He, therefore, prays for complete waiver of pre-deposit as well as stay of recovery in respect of the amount of duty on the basis of the strong prima facie case mad out by the applicants. I have also heard ld. JDR, who has reiterated the findings of the lower appellate authority.
3. I have carefully examined the above submissions. I find that the demand in question was raised on the applicants by the Department by invoking Rule 57H(7). I have examined that provision of law, and I find that the provision is, prima facie, not applicable to the facts of this case. That is a provision which provides that an assessee, when switching over from the Modvat scheme to a scheme covered by an exemption Notification, is required to reverse any Modvat credit taken on the inputs lying in stock on the date of such switch-over.
Apparently that is not the case here. The party, in the instant case, was switching from the Modvat scheme over to the Compounded Levy Scheme which was not a scheme of exemption from payment of duty. In this view of the matter, the applicants have a strong prima facie case and they are entitled to total waiver of pre-deposit of the duty amount and stay of recovery there of, pending the appeal. I allow the application unconditionally and post and the appeal for hearing on 08.05.2001.