Judgment D.K.Jain, J. 1. Rule DB. 2. In this writ petition, under Article 226 of the Constitution of India, the petitioner has brought in challenge order, dated 31-5-2004, passed by the Commissioner of Central Excise (Appeals), directing the petitioner to deposit an amount of Rs. 10 lacs as a condition precedent for entertainment of its appeal against order of adjudication dated 30-1-2004. 3. The background, in which the petition has come to be filed, is as under : The petitioner is engaged in the manufacture of galvanized flattened strips and wires. It was paying Central Excise on the product manufactured by it and in the process, availing Cenvat credit of the duty paid on the inputs used therein, on the strength of a circular issued by the Central Board of Excise and Customs (for short, the Board) dated 16-2- 2001. The said circular clarified that drawing of wire from wire rod amounted to manufacture and therefore, exigible to excise duty. These instructions were, however, withdrawn by another circular dated 29-5-2003. On 8-4-2003, a notice was issued to the petitioner, alleging that the process of drawing of wires being carried by it did not amount to manufacture and therefore, it had wrongly availed of Cenvat credit of the duty paid on the inputs used therein, with the intention of passing on the credit to its buyers. The petitioner was called upon to show cause as to why the Cenvat credit, amounting to Rs. 1,78,83,047/-, availed of for the period from 1-1-2002 to 10-12- 2002, be not recovered from it under Section 11A(1) of the Central Excise Act, 1944 (for short, the Act) read with Rule 12 of the Rules made thereunder. The petitioner was also required to show cause as to why penalty and interest may not be imposed on it. 4. The petitioner denied the allegation. However, not being satisfied with the explanation furnished by the petitioner, the adjudicating authority came to the conclusion that in the light of various decisions of the Supreme Court and the Central Excise, Customs and Service Tax Appellate Tribunal, all the processes, carried on by the petitioner, including the drawing of wires, galvanizing, annealing and pickling of wire rods did not amount to manufacture. Resultantly, he confirmed the afore-mentioned demand and also imposed a penalty of Rs. 15 lacs along with interest. 5. Resultantly, he confirmed the afore-mentioned demand and also imposed a penalty of Rs. 15 lacs along with interest. 5. Being aggrieved, the petitioner preferred appeal to the Commissioner of Central Excise. By the impugned order, the Commissioner has directed the petitioner to deposit the afore-mentioned amount. 6. Learned counsel for the petitioner has assailed the order mainly on the ground that even if the allegation against the petitioner that it had availed of the Cenvat credit wrongly is taken to be correct, the fact remains that the petitioner had paid central excise duty of over Rs. 2.5 crores on the final product by taking the process of drawing of strips and wires from wire rods as amounting to manufacture. It is argued that if the stand of the Department to the effect that the said process did not amount to manufacture was correct, the necessary corollary was that the Revenue had collected an amount of Rs. 2.5 crores as Central Excise duty without the authority of law, which has to be refunded. Relying on the decision of the Supreme Court in Collector of Central Excise v. Maruti Foam (P) Ltd., 2004 (164) E.L.T. 394 (S.C.) = (2004) 6 SCC 722, learned Counsel has also urged that till 29-5-2003, circular dated 16-2-2001, issued by the Board, wherein it was clarified that drawing of wire from wire rod amounted to manufacture, was binding on the Revenue, which fact was lost sight of by the adjudicating authority as well as the Commissioner. It is asserted that in the light of the earlier circular, no element of mens rea could be attributed to the petitioner and therefore, the entire demand created against the petitioner cannot be sustained. In nut-shell, the submission is that the discretion of dispensing with the pre-deposit, vested in the appellate authority under proviso to Section 35-F of the Act, has not been judiciously exercised. 7. Learned Counsel for the Revenue, on the other hand, while supporting the order, passed by the Commissioner, has urged that keeping in view the quantum of demand against the petitioner, the impugned direction cannot be said to be unreasonable. 8. It is true that under Section 35F of the Act requirement of deposit of the amount in dispute is a condition precedent for entertaining an appeal. 8. It is true that under Section 35F of the Act requirement of deposit of the amount in dispute is a condition precedent for entertaining an appeal. The provision, being mandatory in nature, failure to deposit the amount in question would result in rejection of the appeal at the threshold. Nevertheless, the first proviso to the said section confers on the appellate authority a discretion to dispense with the requirement of pre-deposit in full or in part. It needs little emphasis that the discretion so vested in the authority is coupled with a duty and has to be exercised in accordance with the rules of reasons and not arbitrarily or fancifully. It is trite that while dealing with an application for waiver of condition of pre-deposit, it is neither desirable nor proper to embark upon a detailed enquiry to find out whether the stand of the applicant is on terra firma because expression of a final opinion on the merits at that juncture, without full-fledged hearing and consideration of the entire material, is likely to cause prejudice to either side. But at the same time, the authority concerned is required to consider whether, with reference to the material placed before it, a prima facie case for waiver of deposit is made out or not. Similarly, the authority has to consider whether with reference to the pleadings and the material placed before it to substantiate it, undue hardship is likely to be caused to the applicant in case full or partial waiver is not granted. Of course, the interest of the revenue has to be kept in mind. If any of these vital aspects are ignored by the appellate authority, it may warrant interference by the Court even under a limited scope of judicial review in such like matters because such an order would have the attributes of arbitrariness and irrationality. 9. In the present petition, we are not concerned with the merits of the controversy as to whether the petitioner was required to deposit the excise duty and claim Cenvat credit. The only question arising for consideration is whether the Commissioner has exercised discretion in directing the petitioner to deposit Rs. 10 lacs on sound legal principles, noticed above, by taking into account all the relevant facts. 10. The only question arising for consideration is whether the Commissioner has exercised discretion in directing the petitioner to deposit Rs. 10 lacs on sound legal principles, noticed above, by taking into account all the relevant facts. 10. On a consideration of the matter in the light of the material on record, we are of the view that the impugned order lacks proper application of mind and under the given circumstances, the impugned direction to the petitioner to deposit Rs. 10 lacs is not justified. Bearing in mind the ratio of the decision of the Apex Court in Maruti Foams case (supra), wherein it has been held that till the circulars are withdrawn, they are binding on the Revenue, prima facie, there is substance in the contention of learned Counsel for the petitioner that at the relevant time, when the Cenvat credit was availed of, Boards Circular dated 16-2-2001 was in vogue and therefore, payment of excise duty and claim for Cenvat credit was in order. In any event, the issue, though highly debatable, prima facie seems to be tilted in favour of the petitioner. We say no more at this juncture, lest it may cause prejudice to either of the parties. Nonetheless, the balance of convenience lies in favour of the petitioner. Admittedly, the stand of the Revenue that the amount of Rs. 2.5 crores deposited by the petitioner as Central Excise under a bona fide belief that it was engaged in the manufacture of rods etc. is not refundable because the same had been passed on to the consumers, is yet to be adjudicated. In our view, non-consideration of all these vital facts has resulted in vitiating the impugned order and therefore, it cannot be sustained. 11. Accordingly, we allow the writ petition; set aside impugned order dated 31-5-2004 and make the rule absolute, with a direction that the appeal preferred by the petitioner shall be entertained and disposed of on merits without insisting upon any pre-deposit in terms of Section 35-F of the Act. 12. However, in the facts and circumstances of the case, there will be no order as to costs.