Case Note & Summary
The petitioner, Hindustan Petroleum Corporation Limited (HPCL), a government company, filed a writ petition challenging an order of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) dated 11 September 2009. By that order, the Tribunal directed HPCL to deposit Rs.1 crore as a condition for hearing its appeal against a demand of Rs.3.85 crores confirmed by the Commissioner of Central Excise on 6 February 2008. The dispute arose from the denial of exemption under Notification No.64/95-CE dated 16 March 1995, which exempts goods supplied as stores for consumption on board a vessel of the Indian Navy or Coast Guard. HPCL supplied High Speed Diesel Oil (HSD) to the Indian Navy through Indian Oil Corporation Limited (IOCL), which had dedicated pipelines to naval docks. Prior to 6 September 2004, HPCL could remove petroleum products without duty to a warehouse. After that date, the warehousing facility was withdrawn, but HPCL continued the same practice of supplying HSD through pipelines to IOCL's warehouse at Wadala, which then cleared it to naval vessels. The Commissioner issued a show cause notice on 25 September 2007, denying the exemption on the ground that the supply was not directly to the Navy. The demand was confirmed on 6 February 2008. HPCL appealed to CESTAT and sought a waiver of predeposit. The Tribunal, by the impugned order, directed deposit of Rs.1 crore. HPCL challenged this order before the High Court, arguing that it had a strong prima facie case on the interpretation of the exemption notification. The High Court agreed, noting that the supply was ultimately for consumption on board naval vessels and that the petitioner had made out a strong prima facie case. The Court held that the Tribunal ought not to have imposed a condition of predeposit when a strong prima facie case existed. Accordingly, the High Court quashed the impugned order and directed CESTAT to decide the appeal on merits without insisting on any predeposit. The writ petition was allowed.
Headnote
A) Central Excise - Exemption Notification - Supply to Indian Navy - Interpretation - Exemption Notification No.64/95-CE dated 16.03.1995 - The petitioner supplied High Speed Diesel Oil to Indian Navy through Indian Oil Corporation Limited's dedicated pipelines. The Commissioner denied exemption on the ground that supply was not direct to Navy. The Tribunal directed predeposit of Rs.1 crore. The High Court held that the petitioner had made out a strong prima facie case on the interpretation of the notification, as the supply was ultimately for consumption on board naval vessels. The condition of predeposit was set aside and the Tribunal was directed to decide the appeal on merits without insisting on predeposit. (Paras 2-6) B) Central Excise - Predeposit - Waiver - Section 35F of Central Excise Act, 1944 - The High Court held that where a strong prima facie case exists, the Tribunal ought not to impose a condition of predeposit. The petitioner's case was arguable and the demand of Rs.3.85 crores was substantial. The order directing deposit of Rs.1 crore was quashed and the Tribunal was directed to hear the appeal on merits without insisting on any predeposit. (Paras 5-6)
Issue of Consideration
Whether the Customs, Excise and Service Tax Appellate Tribunal was justified in directing the petitioner to deposit Rs.1 crore as a condition for hearing the appeal, when the petitioner had made out a prima facie case on the interpretation of Exemption Notification No.64/95-CE.
Final Decision
The High Court allowed the writ petition, quashed the impugned order of the Tribunal dated 11 September 2009, and directed the Tribunal to decide the appeal on merits without insisting on any predeposit.
Law Points
- Exemption notification
- predeposit
- prima facie case
- waiver of predeposit
- supply to Indian Navy
- interpretation of exemption notification
- Section 35F of Central Excise Act
- 1944
