Exemption for supplies to ADB-financed projects through sub-contractors supported waiver of pre-deposit and recovery stay.

Exemption under Notification No. 108/95-C.E. may still be available for supplies used in an ADB-financed project executed through sub-contractors where certificates from the National Highway Authority of India support the arrangement. The fact that goods were supplied through sub-contractors did not, at the interim stage, defeat the claimed exemption when the project execution by the sub-contractors was undisputed. On that prima facie basis, waiver of pre-deposit and stay of recovery were justified pending appeal.

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Issues: Whether the applicants were entitled to waiver of pre-deposit and stay of recovery in respect of the excise duty and penalty demand, in view of the exemption under Notification No. 108/95-C.E. for supplies used in the project executed through sub-contractors.

Analysis: The applicants produced certificates issued by the National Highway Authority of India in favour of the sub-contractor, and it was not disputed that the sub-contractors were executing the awarded project and that the project was financed by the Asian Development Bank. On these facts, the supply of goods through sub-contractors did not by itself negate the claimed benefit of the notification at the interim stage, and a strong prima facie case was made out.

Conclusion: The applicants were entitled to waiver of pre-deposit and stay of recovery pending the appeal.

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