"On-Shore Terminal" – An exemption or a casualty of undefined term under “Commercial or Industrial Construction Services”

Commercial or Industrial Construction service in its definition as per Section 65(105) (25b) provides for an exemption for construction of ‘transport terminal’, a vague undefined term. This term has led to many interpretations latest of them being construction On-shore Terminal for the transportation of natural gas. For those who do not understand the term On-shore terminal, it is the junction where the unprocessed natural gas is mixed with methanol so as to prevent the formation of ice during transportation and this processed natural gas is transported to various places through pipelines. The Exemption wordings goes as “but does not include such services provided in respect of roads, airports, railways, transport terminals, bridges, tunnels and dams”. So whoever concerned with this issue will look into the principle of ejusdem generis and concentrate on all the near-words to understand transport terminal, since the word remains undefined. In the matter of IVRCL[1], the commissioner (appeals) went on to hold that this principle cannot be applied since there exist no common factor in them and “Transport Terminal” includes the On-shore Terminal. Tribunal in two conditional stay order passed in favour of M/s L&T ltd[2], however differ from the view took by the commissioner appeals and held that by applying the principle of ejusdem generis, all the terms in the list are public goods and are provided by government at different Levels and on-shore terminal does not fall under that category.

The stay orders passed by Tribunal seem to overlook the fact that legislative intention cannot be read into provisions without proper phrases. The provision does not include the criteria that these categories should be of public utility. The proper route to interpretion is that each and every terms mentioned in the exemption have the common factor of “transport of materials” among them and “On-shore Terminal” includes in “Transport Terminals”.  However we have to wait till the appeal is heard by the Tribunal for the reaching a conclusion. Till then this question will remain as such for various parties to interpret as their own wimps and fancies

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[1] Orders-in-appeal No 38 &39/2009 (H-II) S.Tax

[2] 2010 (20) S.T.R. 113 (Tri. - Bang.),  Stay Order 308/2011

How to reverse CENVAT CREDIT while complying with CESTAT stay order demanding pre-deposit?

An assessee whenever a stay order demanding pre-deposit is issued, looks for easy way of making the pre-deposit without the deposit of cash amount. The most comfortable way by which pre-deposit can be made is vide reversing the CENVAT credit. This find legal footing through various judgments like Manak Moti Forging Pvt Ltd 264 ELT 100 (Tribunal-Mumbai), 254 ELT 528 (Tri-Calcutta), 243 ELT 601 (Tri-Chennai), 247 ELT 601(Tri-Chennai). However the next question that daunts the assessee is how to make the reversal. Only column that is ever found for reversal of CENVAT credit is in the tax returns. But the assessee cannot wait till the next return is to be filled.

The practical method followed through the legal tax platform is to make an entry in the CENVAT Credit register of the assessee as to reversal of credit stating that reversal is pursuant to stay order of Hon’ble CESTAT and getting that entry verified by the respective department. On receiving the acknowledgment from the department inform the CESTAT registry as to the compliance made along with the photocopy of the acknowledged CENVAT register. The matter comes to an end on the date of report compliance if the department representative accepts the reversal made by the assessee.          

(Disclaimer:- The opinion mentioned here is of the author and author alone and in no case, should it be linked to any another advocate, be it the law firm where the author is currently working or any other who may or may not know the author. The opinion has to be understood in the context in which it is expressed and in that context only. Author will not be liable for any misinterpretation of the idea mentioned in this article.)