The petitioner is a registered Government contractor carrying out contract works for the Kerala Water Authority. It is the case of the petitioner that while he was awarded a pipeline work, and was obliged to supply and lay pipelines in connection with the said work in terms of Ext.P1 contract and he had completed the work to the satisfaction of the Kerala Water Authority, the said authority had retained various amounts that were due to him while settling the final bill that was submitted by the petitioner. It is further pointed out that in 2010, by Ext.P2 notice, the petitioner was informed that an amount of Rs.3,39,820/- had been paid to him in excess towards short recovery of central excise duty. According to the petitioner, the said amount represents the central excise duty exemption benefit which he had obtained while purchasing the pipelines that had to be laid, in terms of the contract entered into with the Kerala Water Authority. It is the specific case of the petitioner that, when the contract entered into between him and the Kerala Water Authority did not expressly provide for the passing on of excise duty benefits available to the petitioner, there was no justification for the Kerala Water Authority to insist on the passing on of such benefits to it under the contract. 2. A counter affidavit has been filed by the 1st respondent wherein it is pointed out that the demand against the petitioner, in respect of the central excise duty exemption availed by him, was based on an Audit Officer's report. Reference is made to Notification No.6/2007 C.Ex dated 1.3.2007 to indicate that the benefit of exemption under the said notification was obtained on the strength of a certificate issued by the District Collector, and the benefit under the said notification was envisaged for the Kerala Water Authority and not for the petitioner. It is therefore contended that, although the petitioner obtained the benefit of the notification, he ought to have passed on the said benefit to the Kerala Water Authority by deducting the said amounts from the bills submitted to the Water Authority for payment.
2. I have heard Sri.Alias M. Cherian, the learned counsel appearing on behalf of the petitioner as also Sri.M.Dinesh, the learned Standing Counsel appearing on behalf of the 1st respondent Kerala Water Authority.
3. On a consideration of the facts and circumstances of the case as also the submissions made across the Bar, I am of the view that the challenge in the writ petition, against Ext.P2 notice issued by the 1st respondent Water Authority, must necessarily succeed. The claim of the 1st respondent Water Authority is that the benefit obtained by the petitioner, in terms of Notification No.6/2007 C.Ex dated 1.3.2007, was in fact intended for the 1st respondent Water Authority and not for the petitioner. A reference is made to the said notification to substantiate the said contention. On a perusal of the notification however, I find that by the said notification, amendments were effected to Notification No.6/2006-C.E., dated 1.3.2006 and pipes of outer diameter exceeding 20 cm, when such pipes were required as an integral part of the water supply projects, were subjected to nil rate of duty subject to their complying with condition No.(iv) to the said notification. As per condition No.(iv), the person intending to avail the benefit of the notification was required to obtain the certificate issued by the Collector/District Magistrate/Deputy Commissioner of the District in which the plant was located and had to produce the same before the jurisdictional Deputy Commissioner of Central Excise. The certificate had to state that the goods were cleared for the intended use specified in the notification namely, that they were to be used as an integral part of the water supply projects. It is apparent from a reading of the said notification, therefore, that the benefit of the notification was intended for the person who purchased the pipes for the purpose of using it for a water supply project. In the instant case, it was the petitioner who purchased the pipes for the purpose of using it as an integral part of the water supply project for which he had contracted with the 1st respondent Water Authority under Ext.P1 contract. It is not in dispute that in Ext.P1 agreement, there was no provision that obliged the petitioner to pass on the benefit obtained by him, in terms of the aforementioned notification, to the 1st respondent Water Authority. The terms of the agreement clearly show that the petitioner was to render his services, and discharge his obligation under the agreement, in consideration for a specified amount that was to be paid to him under the said agreement. In view of the express provisions of the contract therefore, it was not open to the 1st respondent Water Authority to insist on the petitioner passing on the benefit of the exemption availed by him to the 1st respondent Water Authority. The 1st respondent Water Authority cannot trace its rights in that regard either to the provisions of the contract or to any statutory provision. It follows, therefore, that the demand in Ext.P2 notice cannot be legally sustained. I therefore quash Ext.P2 notice and declare that the petitioner will not be liable to pay to the 1st respondent Water Authority any amount towards the Central Excise duty exemption benefit that accrued to the petitioner in connection with the purchase of pipes for the work under the contract entered into with the Water Authority. The 1st respondent shall refund any amount that was collected from the petitioner towards the Central Excise duty exemption benefit availed by the petitioner in terms of the notification aforementioned. The refund, as directed above, shall be effected to the petitioner within a period of two months from the date of receipt of a copy of this judgment.
The writ petition is disposed as above.
A.K.JAYASANKARAN NAMBIAR JUDGE prp