COMMISSIONER OF CUSTOMS AND Vs. SAIBABA SHIP BREAKING

JUDGEMENT

(1.) THE respondents to these applications, except Chaudhry Industries, are represented before us by counsels. After hearing parties on the stay applications filed by the department we have, with their consent, decided to take up the appeals themselves for disposal.

(2.) EACH of the responders was at the relevant time engaged in breaking up of ships. That is to say, it imported a ship, beached it at Port Alang removed from it salvageable materials and parts, and thereafter reduced the ship to scrap, such scrap being cleared on payment of excise duty applicable to the appropriate headings any of the chapters from 72 to 81 of the tariff. Each of these Chapters is for metals and their products and contains a heading for goods and materials obtained by breaking of ships and other floating structure. Almost without exception, the contract entered into between the purchaser and the seller specifies that the ship is to be brought to Alang by the sellers and then delivered to the buyer. The ships that are to be broken almost invariably sail into the port under their own motive power. The ships therefore contain in addition to fuel and oil required for running the ship's engine and other machinery food, drink and other stores for consumption by the crew.

(3.) BEFORE the ship is broken up, the fuel and stores are removed on payment of appropriate duty of customs, including additional duty of customs. The question for consideration in these appeals is whether the ship -breaker could take such duty as modvat credit to be used towards payment of duty on goods and materials obtained by breaking up of ship.