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2014 (9) TMI 441 - HC - CustomsLevy of Additional Customs Duty u/s 3(1) of CTA - Countervailing duty (CVD) - importer prayed to declare the heading No.89.08 of the Central Excise Tariff Act, 1985 (5 of 1986) as unconstitutional and ultra vires Entry No.84 of the Union List - import of old discarded and un-seaworthy ships for breaking up of such old and scrap ships at Sosiya, Alang. - Held that - Hon'ble Supreme Court in the case of Hyderabad Industries Ltd. Versus Union of India, 1999 (5) TMI 29 - SUPREME COURT OF INDIA ruled that on a correct interpretation of the relevant provisions of the two Acts, additional duty which is leviable under section 3(1) of the Tariff Act is independent of the Customs Duty which is leviable under section 12 of the Customs Act. It is further observed and held that the observations in Khandelwal Metal & Engineering Works 1985 (6) TMI 178 - SUPREME COURT OF INDIA seems to suggest that even no process of manufacture or production has taken place the imported articles can still be subjected to the levy of additional duty, does not appear to be correct inasmuch as the measure for levy of additional duty is the quantum of excise duty leviable on a similar article under the Excise Act. Applying the ratio of the law laid down by the Hon'ble Supreme Court in the case of Hyderabad Industries Ltd. Versus Union of India, 1999 (5) TMI 29 - SUPREME COURT OF INDIA , referred to hereinabove to the facts of the case on hand, and with respect to the additional duty sought to be levied under heading No.89.08 at the rate of 15% on the vessels and other floating structures for breaking up which are not manufactured in India and therefore, no excise duty is leviable on vessels and other floating structures for breaking up . No additional duty can be levied under section 3(1) of the Tariff Act on the vessels and other floating structures for breaking up . Under the circumstances, aforesaid heading 89.08 which provides levy of additional duty at 15% on the vessels and other floating structures for breaking up would be contrary to and/or ultra vires to section 3(1) of the Tariff Act and therefore, we are of the opinion that the vessels and other floating structures imported into India for breaking up, additional duty under section 3(1) of the Customs Tariff Act is not liable to be levied. - decided in favor of assessee.
Issues Involved
1. Constitutionality of Heading No. 89.08 of the Central Excise Tariff Act, 1985. 2. Levy of Additional Customs Duty on imported vessels and floating structures for breaking up. 3. Applicability of the Supreme Court's decision in Khandelwal Metal & Engineering Works vs. Union of India. 4. Validity of the levy under Section 3(1) of the Customs Tariff Act, 1975. Detailed Analysis 1. Constitutionality of Heading No. 89.08 of the Central Excise Tariff Act, 1985 The petitioners challenged Heading No. 89.08 of the Central Excise Tariff Act, 1985, arguing it was unconstitutional and ultra vires Entry No. 84 of the Union List of the Seventh Schedule to the Constitution of India, as well as Articles 14 and 19 of the Constitution. They contended that the heading, which covers vessels and other floating structures for breaking up, was improperly used to levy additional customs duty on imported vessels intended for scrapping. 2. Levy of Additional Customs Duty on Imported Vessels and Floating Structures for Breaking Up The petitioners argued that additional customs duty under Section 3(1) of the Customs Tariff Act, 1975, should only be levied if the imported article is similar to one that is produced or manufactured in India. They contended that since vessels and floating structures for breaking up are not manufactured in India, they should not be subject to additional customs duty. The respondents, however, maintained that the additional duty was validly levied under Heading No. 89.08. 3. Applicability of the Supreme Court's Decision in Khandelwal Metal & Engineering Works vs. Union of India The respondents relied on the Supreme Court's decision in Khandelwal Metal & Engineering Works, which held that additional customs duty could be levied even if the imported article was not manufactured or produced in India. However, the petitioners pointed out that this decision had been partly overruled by the Supreme Court in Hyderabad Industries Ltd. vs. Union of India, which clarified that additional duty could only be levied if a like article was produced or manufactured in India. 4. Validity of the Levy under Section 3(1) of the Customs Tariff Act, 1975 The court examined Section 3(1) of the Customs Tariff Act, 1975, which prescribes the levy of additional duty equal to the excise duty on a like article if produced or manufactured in India. The court noted that the explanation to Section 3(1) specifies that the additional duty should be equivalent to the excise duty for the time being leviable on a like article if produced or manufactured in India. Judgment The court held that the vessels and other floating structures imported for breaking up are not produced or manufactured in India, and therefore, no excise duty is leviable on such articles. Consequently, no additional customs duty can be levied under Section 3(1) of the Customs Tariff Act, 1975, as per the rate prescribed under Heading No. 89.08 of the Central Excise Tariff Act, 1985. The court declared Heading No. 89.08 to be ultra vires Section 3(1) of the Customs Tariff Act, 1975, and quashed any demand for additional duty based on this heading. The petitions were thus allowed, and the rule was made absolute to the extent that no additional duty is leviable on the imported vessels and floating structures for breaking up.
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