Pre-deposit conditions in turnkey supply disputes cannot stand where contracts closely mirror a binding inter-State sale ruling.

A prima facie comparison with the earlier DMRC ruling showed that the turnkey supply and works contract arrangements involved movement of goods in pursuance of, and incidental to, the contract, with no realistic scope for diversion to other purposes. Because the contracts in issue were not materially distinguishable from the earlier Supreme Court-approved arrangement, the severe pre-deposit condition could not be sustained on the facts presented. The pre-deposit direction was therefore set aside and the appeals were left to be heard on merits.

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Issues: Whether the Tribunal was justified in directing deposit of 20% of the tax and interest demand and 10% of the penalty where the transactions, on a prima facie comparison with the earlier DMRC ruling, appeared to involve inter-State sale/import in connection with turnkey supply and works contracts.

Analysis: The earlier Supreme Court-approved ruling had treated similar turnkey supply arrangements as transactions where the movement of goods was in pursuance of and incidental to the contract, with no realistic possibility of diversion to other purposes. In the present matters, the Court found no significant material distinction between the contracts in question and those earlier examined, despite the different contractees. The Tribunal's order itself proceeded on a prima facie view and required a closer merits examination, but the Court held that the apparent similarity to the binding earlier decision meant that the severe pre-deposit condition could not be sustained on the facts presented.

Conclusion: The pre-deposit direction was set aside and the petitions were allowed, leaving the appeals to be heard on merits by the Tribunal.

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