2011 (2) TMI 9 - SC - Customs

Ocean going vessel - exemption for breaking / scrapping purposes - order of the tribunal - Held that - the impugned judgment deserves to be set aside on the short ground that while deciding the case, the Tribunal has ignored the specific directions issued by this Court, vide order dated 30th August, 2001. It is evident from the impugned order, in particular from paras 15 and 16 that the Tribunal has not appreciated the facts obtaining in the present case in their correct perspective, which has resulted in vitiating its decision on the question of leviability of import duty. Although, from para 14 of the impugned order it is evident that the Tribunal was conscious of the direction of this Court that it was required to first record the correct facts and then in the factual perspective locate and apply the relevant law, yet in the very next paragraph it proceeds to hold that when it is accepted that Notification No. 118/59-Cus. did not exist at the time of clearance of the vessel from the ship yard, the persistent plea that the ship was manufactured in a warehouse located in India and therefore, it attracted excise duty alone need not be considered at all. In our opinion, in light of the decision and directions of this Court in C.A. 1998 of 2000, judicial discipline obliged the Tribunal to examine the entire legal issue after ascertaining the foundational facts, regardless of its earlier view in the matter. Therefore, the decision of the Tribunal cannot be sustained. Matter remanded back to tribunal for fresh adjudication and determination of the question of leviability of import duty on an Indian-built ship brought into India for breaking purpose

Summary

Issues Involved:
1. Leviability of customs duty on an Indian-built ship sold for breaking.
2. Applicability and interpretation of various customs notifications.
3. Compliance with judicial directions and factual determination by the Tribunal.

Detailed Analysis:

1. Leviability of Customs Duty on an Indian-Built Ship Sold for Breaking:

The primary issue in this case was whether customs duty was leviable on an Indian-built ship, M.V. Jagat Priya, which was sold for breaking. The appellant argued that since the ship was built in India and excise duty was paid at the time of its clearance, it should not be subject to customs duty upon being sold for breaking. The Tribunal, however, held that the ship, being manufactured in a customs bonded warehouse, was akin to goods manufactured in a foreign country and thus subject to customs duty when brought back to India for breaking purposes.

2. Applicability and Interpretation of Various Customs Notifications:

The Tribunal initially relied on Notification No. 133/87-Cus, which stipulated that customs duty was payable on the ship at the time of breaking. The appellant contended that Notification No. 118/59-Cus, which was applicable at the time of the ship's clearance, should govern the case. The Tribunal later clarified that Notification No. 118/59-Cus was not in existence at the time of the ship's clearance, having been superseded by Notification No. 163/65-Cus. The appellant argued that the ship should be treated as an Indian-built vessel, not subject to customs duty, relying on the decision in Baijnath Melaram, which held that no customs duty was payable on Indian-built ships.

3. Compliance with Judicial Directions and Factual Determination by the Tribunal:

The Supreme Court had remanded the matter to the Tribunal, directing it to first ascertain the facts and then determine the law. However, the Tribunal failed to comply with these directions, as it did not fully appreciate the factual background of the case. The Tribunal's decision was based on the assumption that Notification No. 118/59-Cus was not applicable, without thoroughly examining the foundational facts as directed by the Supreme Court.

Conclusion:

The Supreme Court set aside the Tribunal's decision on the grounds that it had not complied with the specific directions to ascertain the facts and then apply the relevant law. The case was remanded back to the Tribunal for fresh adjudication, emphasizing the need to record the correct facts and then determine the question of leviability of import duty on an Indian-built ship brought into India for breaking purposes. The appeal was allowed, and the matter was sent back to the Tribunal for reconsideration in accordance with the law and the observations made by the Supreme Court in C.A. No. 1998 of 2000. There was no order as to costs.