Project exemption under Notification 108/95-CE: pre-deposit waived where withdrawal from the project was not specifically found.

Exemption under Notification No. 108/95-CE, as amended by Explanation 2 inserted by Notification No. 13/2008-CE, turned on whether the goods were actually withdrawn from the approved project. Supply to contractors executing approved projects was not, by itself, a valid basis to deny exemption, as that objection was already covered against the Revenue by binding High Court authority. Because the demand had been confirmed on a speculative basis without a specific finding of withdrawal from the project, the matter required full examination at the final hearing. On that footing, a prima facie case was found for admission of the appeal without pre-deposit and for stay of recovery during pendency.

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Issues: Whether the appellant had made out a prima facie case for admission of the appeal without pre-deposit and for stay of recovery, in a dispute concerning exemption under Notification No. 108/95-CE as amended by Explanation 2 inserted by Notification No. 13/2008-CE.

Analysis: The exemption was not denied merely because the goods were supplied to contractors executing approved projects, as that objection stood covered against the Revenue by the binding High Court view. On the effect of Explanation 2, the decisive question was whether the goods were actually withdrawn from the project, not whether they might have been removed after completion or might not form an integral part of the project. As the demand had been confirmed on a speculative basis without a specific finding of withdrawal from the project, the matter required examination at final hearing and did not justify insistence on pre-deposit at this stage.

Conclusion: The appeal was admitted without pre-deposit and recovery of the dues was stayed during pendency of the appeal.

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