Exemption for water supply pipes with industrial use carved out, so duty stay was denied but penalty relief was granted.

Pipes used in a water supply project were examined under an exemption notification, but the exclusion for plants supplying water for industrial purposes created doubt because part of the water was intended for non-domestic and industrial use. The interpretative dispute meant the claim to exemption was not free from doubt, so there was no strong prima facie case against the duty demand at the stay stage. However, the same uncertainty justified relief against penalty, and waiver of the penalty amount was granted while full stay on the duty component was refused.

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Issues: Whether the appellants were entitled to waiver of the penalty and full stay in view of their claim that the pipes used in the project were covered by the exemption notification relating to water supply projects.

Analysis: The pipes were stated to be used for supplying water from the reservoir to a treatment plant, from where part of the water would be used for domestic consumption and part for non-domestic use, including industrial purposes. The explanation to the exemption carved out plants supplying water for industrial purposes from the ambit of the exemption. The parallel exemption relied upon for industrial use under a different notification was noted, but the wording of the relevant notification supported the view that the present claim was not free from doubt. In that background, while the appellants did not make out a strong prima facie case on the duty demand, the interpretative dispute justified grant of relief against penalty at the stay stage.

Conclusion: The appellants were not granted complete stay on the duty component, but they were granted waiver of the penalty amount.

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