2005 (7) TMI 413 - AT - Central Excise

Summary

Issues:
Leviability of additional duty of customs on imported vessels for breaking up under exemption Notification No. 234/82-C.E.

Analysis:
The case involved an appeal against the Order-in-Appeal passed by the Commissioner of Customs & Central Excise, Visakhapatnam regarding the leviability of additional duty of customs on four imported vessels meant for breaking up. The issue centered around the interpretation of exemption Notification No. 234/82-C.E., dated 1-11-82, which exempted "ocean going vessels" from duty. The Commissioner (Appeals) held that the exemption applied only to ocean-going vessels and not those intended for breaking up, as ship breaking is for vessels deemed unseaworthy, while the exemption is for seaworthy vessels. The Deputy Commissioner had ruled that the vessels were chargeable to countervailing duty under item 68, leading to the appeal.

The appellant argued various points, including citing the Supreme Court's decision in Hyderabad Industries Ltd. v. Union of India, emphasizing that non-excisable items are not liable for additional duty of customs. They contended that the vessels should be assessed as imported, irrespective of post-importation activities like breaking up. Additionally, they highlighted that the vessels arrived under their own power, maintaining their classification as ocean-going vessels. The appellant also accused the Commissioner (Appeals) of violating natural justice by not providing the Bhav Nagar Customs report and disregarding a High Court order for a refund.

The Revenue, represented by the learned SDR, argued that the vessels should be classified under item 68, making them liable for countervailing duty, as they were not considered ocean-going vessels due to their intended breaking up purpose. The absence of a specific definition for ocean-going vessels in the Central Excise Tariff Act, 1985 was noted, with a contention that the exemption notification did not apply to vessels intended for breaking up.

Upon careful review, the Tribunal concluded that the vessels, though old and destined for breaking up, maintained their classification as ocean-going vessels under the relevant exemption notification. The Tribunal emphasized that goods should be assessed based on their importation form, not post-importation activities, unless specified otherwise. The Tribunal found that the Commissioner (Appeals) had misinterpreted the exemption notification and allowed the appeal, granting consequential relief to the appellant.

In conclusion, the Tribunal's judgment favored the appellant, ruling that the imported vessels for breaking up were rightfully covered by the exemption Notification No. 234/82-C.E., dated 1-11-82, meant for ocean-going vessels, despite their intended use for breaking up. The decision highlighted the importance of interpreting exemption notifications based on the goods' status at the time of importation and not post-importation activities, unless explicitly stated otherwise in the tariff.