ENGEE INDUSTRIAL SERVICE (P) LTD. Vs. CCE

JUDGEMENT

(1.) SHORT question that arises for consideration in this appeal is whether the ship which was brought by the appellant for breaking is subject to payment of additional duty equal to customs duty under Section 3(1) of the Customs Tariff Act, 1975. According to learned Counsel representing the appellant, the Ship which has been brought for breaking is not one either manufactured in India or is capable of being manufactured in India. According to Counsel no Ship is manufactured in India for being broken. It is his argument that the word "manufacture" can only mean an article to be brought into existence for the purpose of use and not for the purpose of destroying, dismantling or breaking it. Since the Ship that has been brought is not one capable of being manufactured in India for being simply broken, Counsel argues, the same is not subject to additional duty under Section 3 of the Customs Tariff Act.

(2.) A Constitution Bench of the Apex Court in Hyderabad Industries v. Union of India, 1998 (108) ELT 321 considered the scope and ambit of Section 3(1) of the Tariff Act. According to their Lordships the words "if produced or manufactured in India" does not mean that like article should be actually produced or manufactured in India. If an imported article is one which has been manufactured or produced then it must be presumed that such an article can likewise be manufactured or produced in India. The Ship which has been brought by the appellant to India is one which can be presumed to have been manufactured or produced in India. In such a situation Section 3(1) of the Customs Act squarely comes into play. For the purpose of saying what amount by way of additional duty is leviable under Section 3(1) of the Customs Tariff Act, it has to be imagined that the imported article had been manufactured or produced in India then to see what amount of excise duty was leviable thereon. The Ship which has been brought for breaking is not one either manufactured or produced in India but was capable of being manufactured or produced in India. This means that it has to be imagined that the article imported had been manufactured or produced in India and then to see what amount of excise duty are leviable thereon. That amount is the additional duty payable. The rate of additional duty under Section 3 of the Tariff Act is not relatable to the First and Second Schedule of the Customs Act. The additional duty if leviable, has to be equal to the excise duty which is leviable under the Excise Act. The argument advanced by learned Counsel that a Ship brought for breaking cannot be treated as capable of being manufactured in India cannot be of any legal consequence. The Ship as such was manufactured abroad and that one is to be treated as capable of being manufactured or produced in India. Duty payable under the Customs Act on the Ship brought has been paid. Like amount is the additional duty payable under Section 3(1) of the Customs Tariff Act.

(3.) LEARNED Counsel representing the appellant brought to our notice a decision rendered by a learned Single Judge of the Calcutta High Court in M/s. Amar Steel Industries v. Collector of Customs reported in, 1993 (67) ELT (Calcutta) in support of his contention that the appellant is entitled to the benefit of Notification No. 167/86 -CE dated 1.3.86. In that case since the scrap made out of broken Ship was produced without the aid of power, benefit of the Notification was extended to the owner of the Ship. Similarly, according to Counsel, the benefit of the Notification should be extended to the appellant herein as well. Referring to the said decision, Commissioner in the order impugned observed that "the judgment of Hon'ble Calcutta High Court (Single Judge Order) in the case of M/s. Amar Steel Industries v. Collector of Customs reported in : 1993 (67) ELT 44 relied upon by the appellant has since been stayed by Division Bench in an appeal against the judgment filed by the Department". Learned Counsel has not placed any evidence before us to show that the said statement made by the Commissioner is incorrect. Further, Notification 167/86 -CE gave duty exemption to goods falling under various Chapter Heading including Chapter Heading 89. That Chapter Heading inter alia takes within its ambit vessels and other floating structures for breaking up. Vessels and other floating structures falling under Chapter Heading 89 are the goods covered by the Notification. They get the benefit provided that no process in or in relation to the manufacture of those goods is ordinarily carried on with the aid of power. In other words, the goods to get the benefit of the exemption notification should have been manufactured without the aid of power. No argument was advanced before us to the effect that the Ship which was brought was manufactured without use of power. Manufacture of the vessel which was brought in for breaking was certainly carried out with the aid of power. Contention of the learned Counsel is that in the process of breaking no power is being used and so the vessel must fall within the mischief of the Notification. This argument cannot be accepted. The vessel which falls under Chapter Heading 89 can get exemption from duty only if in its manufacture, power was not utilised. Nobody has got a case that the Ship which was brought into India by the appellant was manufactured without the aid of power. So relying on the decision of the Apex Court in Hyderabad Industries case we hold that the Ship which as brought into India for breaking was not covered by the above mentioned Notification and so appellant cannot claim the benefit of exemption contemplated by it. Since the goods imported, namely, the Ship which was to be broken is not one exempt from excise duty, the contention of the appellant that the additional customs duty is not leviable cannot be sustained. In other words, Ship brought for breaking, being not exempt from customs duty, cannot claim exemption from levy of additional duty under the Customs Tariff Act.