1998 (3) TMI 282 - AT - Customs

Summary

Issues:
1. Stay of operation of the order of the Commissioner (Appeals) regarding assessment of Customs duty on a ship purchased for breaking up into scrap.
2. Interpretation of Notification 118/59 exempting ships from Customs duty.
3. Whether a vessel loses its character as an ocean-going vessel when imported for breaking up into scrap.

Analysis:
The case involved an application for stay of the operation of the order of the Commissioner (Appeals) regarding the assessment of Customs duty on a ship purchased for breaking up into scrap. The Superintendent had assessed the ship to duty under specific headings of the Tariff. The Commissioner (Appeals) accepted the contention that the ship, built in India, was exempted from Customs duty under Notification 118/59. The Commissioner (Appeals) held that the liability to duty arose when the ship was manufactured in Customs bond and cleared thereafter, and that the ship could not be considered imported into India when brought back for scrap. The Commissioner relied on previous court decisions to support this interpretation.

The Department contended that the ship, once sold for scrapping, ceased to be an ocean vessel and thus lost eligibility for exemption. They argued that since the ship was brought from outside India, it became imported goods. The Departmental Representative cited a Supreme Court decision that overruled the Bombay High Court's decision relied upon by the Commissioner (Appeals). The Department argued that the ship could be considered imported into India more than once, contrary to the previous interpretation.

The respondent's advocate argued that once a vessel receives the benefit of Notification 163/65, it cannot be subjected to duty again. He highlighted that a significant portion of the vessel had already been broken into scrap and cleared, making the application for stay ineffective. The advocate distinguished between Notification 163/65 and 118/59, noting that both exempt ocean-going vessels but with different conditions regarding subsequent breaking up of the vessel.

The Tribunal, in its analysis, rejected the contention that the vessel lost its character as an ocean-going vessel when imported for breaking up. The Tribunal noted that the Supreme Court's judgment referred to a different notification with a specific provision for duty on broken-up vessels, unlike Notification 118/59. The Tribunal also observed that most of the vessel had already been cleared by the time of the application, making the objective of safeguarding duty through a stay impractical. Consequently, the Tribunal declined to stay the operation of the Commissioner (Appeals) order, ultimately dismissing the application.