2010 (1) TMI 161 - HC - Central Excise

High Court overturns Tribunal's duty demand order, stresses consistency in legal precedents. Direct supply crucial for Navy exemption.

HINDUSTAN PETROLEUM CORPORATION LTD. Versus UNION OF INDIA

The High Court set aside the Tribunal's order confirming a duty demand of Rs.3.85 crores, emphasizing the importance of consistency and adherence to legal ... Supply of High Speed Diesel Oil - Exemption Notification (No.64/95CE) dated 16th March 1995 – Exempts all goods other than cigarettes `if supplied as stores for consumption on board a vessel of the Indian Navy or Coast Guard – Demand of duty was Rs. 3.85 crores – Tribunal directed the petitioner to deposit an amount of Rs.1 crore within a period of four weeks and to report compliance - The grievance of the petitioner was that the same member of the Tribunal, who passed the impugned order dated 11th September 2009 subsequently passed an order on 20th November 2009 in a batch of cases involving the same question, by which a complete waiver of predeposit was granted, subject to the filing of a bond – held that - Tribunal, first and foremost, is duty bound by Article 141 of the Constitution of India to ensure that it follows binding precedent of the Supreme Court. The Tribunal as a judicial body must follow principles of consistency when it decides cases. The lack of consistency is clear on the face of record - Judicial orders must be passed by the Tribunal with a greater degree of circumspection and application of mind. Whim and caprice are alien to the judicial process. Consistency, based on judicial precedents should be the norm. Issues:Appeal against order of adjudication confirming duty demand, Exemption Notification applicability for supply of High Speed Diesel Oil to Indian Navy, Inconsistency in Tribunal orders for pre-deposit waiver, Interpretation of Exemption Notification No. 64/95, Compliance with Supreme Court judgment on direct supply to Indian Navy.Analysis:1. The petitioner appealed against an order confirming a duty demand of Rs.3.85 crores by the Commissioner. The issue involved the applicability of Exemption Notification No. 64/95 for supplying High Speed Diesel Oil to Indian Navy vessels. The petitioner claimed exemption under the Notification for supplying through Indian Oil Corporation Limited's installations connected to naval docks via dedicated pipelines.2. The Tribunal directed the petitioner to deposit Rs.1 crore within four weeks, which the petitioner complied with. The Tribunal's order was challenged on the grounds of inconsistency, as similar cases involving different oil companies were granted complete waiver of pre-deposit. The Tribunal's interpretation of the Notification's requirement for direct supply to Indian Navy was crucial in this case.3. The Tribunal's initial order rejected the petitioner's case for a complete waiver of pre-deposit based on the direct supply condition under the Notification. The Tribunal also noted a subsequent Notification exempting fuels procured by IOCL for naval vessels, effective from November 2007, which was not applicable to the case in question.4. The Tribunal's inconsistent approach in granting pre-deposit waivers to different oil companies and even within the petitioner's cases raised concerns. The Tribunal's reliance on the Supreme Court judgment in Leader Engineering Works emphasized the necessity of direct supply to Indian Navy vessels for exemption under the Notification.5. The High Court highlighted the Tribunal's duty to follow Supreme Court precedent and maintain consistency in decisions. The lack of consistency in Tribunal orders prompted the High Court to remit the matter back for reconsideration, emphasizing the importance of circumspection and adherence to judicial precedents in passing orders.6. Ultimately, the High Court set aside the Tribunal's order, restoring the stay application for fresh consideration. The High Court stressed the need for judicial orders to be passed with careful consideration and adherence to legal principles, directing the Tribunal to reevaluate the matter based on the observations made by the Court.Conclusion:The High Court's decision to remit the matter back to the Tribunal for reconsideration highlighted the importance of consistency, adherence to legal precedents, and careful application of legal principles in judicial decisions. The case underscored the significance of direct supply to Indian Navy vessels for claiming exemption under the relevant Notification, emphasizing the need for clarity and uniformity in interpreting legal provisions.