2010 (8) TMI 305 - HC - Central Excise

Ship Breaking activities. The activities of dismantling, breaking, cutting of the ships resulting in realisation of ferrous and non ferrous scrape of iron and steel, copper/brass, lead and aluminum amounted to manufacture under section 2(f) of the Central Excise & Salt Act,1944 It is the case of the appellant that the respondents had manufactured and cleared the excisable goods without following the procedure prescribed under the provisions of the Act and therefore, show cause notices had been issued to the respondents demanding Central Excise Duty to the extent of43,06,981.86 - The CESTAT allowed the appeals filed by the respondents and set aside the order in original passed by the Adjudicating Authority The letter in the nature of circular is issued, then it must be followed by all the Customs Authorities Based on the judgment of the Apex Court in the case of Steel Authority of India Vs. Collector of Customs, Bombay (1999 -TMI - 45339 - SUPREME COURT OF INDIA), wherein it is held that Trade notice issued by one Customs House must bind all custom authorities and if it is erroneous, it should be withdrawn or amended - Appeal is dismissed on merits

Summary

Issues:
Appeal against CESTAT order on Central Excise duty demand for ship breaking activities; Interpretation of Board's instructions dated 6th April, 1989; Applicability of instructions to other Collectorates; Compliance with Ministry's instructions dated 8th April, 1987.

Analysis:

1. Central Excise Duty Demand for Ship Breaking Activities:
The respondents, license holders engaged in ship breaking activities, were issued show cause notices for manufacturing and clearing excisable goods without following prescribed procedures, leading to a demand of Rs. 43,06,981.86 in Central Excise Duty. The Adjudicating Authority confirmed the duties demanded under Section 11A(1) of the Central Excise & Salt Act, 1944. Subsequently, the CESTAT allowed the appeals filed by the respondents, setting aside the original order.

2. Interpretation of Board's Instructions - 6th April, 1989:
The appellant contended that the Board's instructions dated 6th April, 1989, addressed to specific Collectorates in Gujarat, were intended to apply only to cases covered by consent terms recorded in orders of the Gujarat High Court. The appellant argued that the instructions did not extend to cases pending before other Collectorates. The Tribunal, however, relied on these instructions and Ministry's communication dated 8th April, 1987, exempting ship scrap from duty, to waive demands on excisable goods from ship breaking activities up to March 1986.

3. Applicability of Instructions to Other Collectorates:
The appellant argued that the instructions issued by the Board were specific to Gujarat Collectorates and should not be applied to cases pending before other Collectorates. In contrast, the respondent contended that once circular instructions were issued, they should be followed uniformly by all Customs Authorities, citing a Supreme Court judgment to support this argument. The respondent highlighted subsequent circulars allowing all Collectorates to follow the initial instructions.

4. Compliance with Ministry's Instructions - 8th April, 1987:
The Tribunal considered the Ministry's instructions dated 8th April, 1987, which directed no enforcement of demands for periods before the issuance of Notification No.386/86CE dated 20th August, 1986, granting exemption to material from ship breaking. The Tribunal upheld the waiver of demands based on these instructions, leading to the dismissal of the appeal by the Revenue.

In conclusion, the High Court upheld the Tribunal's decision, emphasizing the importance of following circular instructions uniformly and considering the Ministry's directives regarding exemptions for ship breaking activities. The appeal was dismissed on merits, with the Tribunal's findings based on the instructions remaining conclusive.