GHAZIABAD SHIP BREAKERS Vs. COMMISSIONER OF CUS. (PREV.)

JUDGEMENT

(1.) In these five appeals -three filed by M/s. J.M. Industries and two appeals filed by M/s. Ghaziabad Ship Breakers - arising out of different orders in Appeals, the common issues involved are whether the Special Additional Duty of Customs is leviable on ships imported for breaking and whether fuel and oil are to be classified along with the ship and not chargeable to Customs duty separately and whether the Customs duty is leviable on foodstuff.

(2.) Shri A.D. Maru, learned Advocate, submitted that the Appellants imported old ships for breaking, falling under Heading 89.08 of the first Schedule to the Customs Tariff Act; that Special Additional Duty of Customs (SAD in short) was imposed by the Finance Act, 1988 in lieu of Sales Tax; that Notification No. 56/98 -Cus., dated 1 -8 -98 exempts SAD in respect of goods which are imported for sale as such, subject to the condition that they are imported at the time of clearance for home consumption, importer makes a specified declaration to that effect in the Bill of Entry; that the first proviso also provided that Exemption shall not apply if the importers sells the imported goods from a place, locality or in an area where no tax is chargeable on sale or purchase of goods. He, further, submitted that the ship breaking yard 'Alang' is a place where sales tax has been paid and the ship breakers are liable to pay sales tax on sale of goods and materials obtained by breaking up of ships; that the Department is denying the exemption on the plea that the ship is not sold as such; that the Department has failed to appreciate the fact that the ships are imported only for the purpose of breaking up and can be sold only after breaking up into a resultant goods and materials obtained therefrom and can not be sold as such because in that condition these are not fit for sale as being incapable of being navigation which is there general use; that accordingly the words, "as such" used in the notification would take in the goods and materials obtained by breaking up within its ambit, and such goods and materials would not attract SAD as Sales Tax is payable in the area where the goods and material are sold. The learned Advocate relied upon the decision in the case of Commissioner of Sales Tax v. Delhi Iron and Steel Company Pvt. Ltd. - 1995 (98) STC 2002 (Bombay) wherein it was held that the condemned and unserviceable ships purchased by the dealer was not a ship but re -rollable scrap in the form of an old ship for dismantling. In fact, the dealer acquired only the old materials and articles contained therein which were sold by it in the form, in which they were acquired. No process whatsoever would apply to the goods which looses in the process of manufacture. The question of using the goods purchased in the manufacture of other goods, therefore, did not arise. Reliance has also been placed on the decision in the case of State of Tamil Nadu v. Raman and Company - 1994 (93) STC 185 (S.C.).

(3.) Ld. Advocate also mentioned that the appellants are not liable to pay the duty on fuel oil of the ships on classifying it separately because it is covered by Para 2(b) of the Board's Circular No. 37/96 -Cus., dated 3 -7 -96; that Para 2(b) of the Circular provides that fuel and oil contained in the vessel, machinery and engine can also be regarded as forming integral part of the vessel and hence be classified under Heading 89.08; that Para 2(d) of the said Circular provides that remaining fuel and oil and other ships stores, including drinks, food stuff are classifiable separately in their own appropriate Heading; that in the present matters there was no "remaining fuel and oil" and as such it was not to be classifiable separately; that it is bounded duty of the seller of the ships to provide sufficient fuel and oil and water so that the ships can undertake smooth voyage and also can reach properly at her own power; that price of the ships is determined on the basis of LDT and fuel and oil is included in the LDT. Finally, he submitted that as the foodstuff is consumed by the crew member on board the vessel, during their compulsory and necessitated stay period till beaching, no customs duty is payable on the foodstuff in terms of provisions of Sections 86 and 87 of the Customs Act. He relied upon the decision of the Tribunal in the case of Jindal Drilling and Industries Ltd. v. Commissioner of Customs, 2000 (116) E.L.T. 297 (Tri.) wherein it was held that the ship stores are exempt from payment of Customs duty.