TAXAP/1430/2006 1/6 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL No. 1430 of 2006 For Approval and Signature: HONOURABLE MR.JUSTICE D.A.MEHTA HONOURABLE MS.JUSTICE H.N.DEVANI ========================================= 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ========================================= COMMISSIONER OF CUSTOMS (PREVENTIVE) Versus M/S. MUSTAN TAHERBHAI ========================================= Appearance : MR Y.N. RAVANI for Appellant(s) : 1, MR PARESH M DAVE for Opponent(s) : 1, ========================================= CORAM : HONOURABLE MR.JUSTICE D.A.MEHTA and HONOURABLE MS.JUSTICE H.N.DEVANI Date : 15/07/2008 ORAL JUDGMENT (Per : HONOURABLE MR.JUSTICE D.A.MEHTA) TAXAP/1430/2006 2/6 JUDGMENT 1. Appellant revenue has proposed the following three questions originally when the appeal was filed. (I) Whether in the facts and circumstances of the case, respondents in whose hands the vessel was actually broken up and who had filed IGM/ Bill of Entry is liable to pay customs duty that became leviable in accordance with proviso to notification No.163/65-CUS dated 16.10.1965? (II)Whether the Tribunal committed error in not following the law laid down by Hon'ble High Court in the case of M/s Haryana Ship Breakers Pvt. Ltd. reported at 1997 (96) ELT 541 (Guj) believing it contrary to the Apex Court's judgment in Jalyan Udyog reported at 1993(68) ELT 9 (Supreme Court)? (III)Whether the Tribunal committed error as on presentation of Bill of Entry as required under section 46(1) of the Customs Act, 1962, and filing of IGM by importer, he will be liable to pay customs duty and not the original owner of the ship? Subsequently, appellant has proposed following four additional questions. (IV)Whether M/s Mustan Taherbhai is not an importer within the meaning of Section 2(26) of the Customs Act, 1962? (V)Whether in absence of specific condition [like condition No.65 of Notification No.16/200-Cus. dated 2.3.2000] stipulating the filing of fresh Bill of Entry for breaking up and creating a legal fiction in the Notification No.163/65- Cus. Dated 16.10.1965 as amended vide Notification No.129/86-Cus., dated 17.02.1986 cannot be retrospectively extended and posted to be read in notification No.163/65- Cus.? (VI)Whether the relevant date on which the vessel is broken up would be the date on which it is taken for breaking, i.e. the date of transfer from the Shipping Corporation of India to the respondent and not the date of beaching at Alang and on that date the importer would be Shipping Corporation of India? (VII)Whether as provided under Section 15 ibid, rate of duty in the case of goods entered for home consumption under Section 45, on the date on which a bill of entry in respect of such goods is presented under that section shall be the rate TAXAP/1430/2006 3/6 JUDGMENT in force and accordingly in the instant case effective rate would tariff read with Sr. No.298 of Notification No.16/2000-Cus. dated 1-3-2000 subject to condition No.65? 2. The facts, which are not disputed, are that the respondent entered into a Memorandum of Agreement on 22.3.1997 with M/s Shipping Corporation of India for purchase on a vessel named “M.V. Vishwa Yash” for scrapping. Shipping Corporation of India had taken the delivery of the vessel in 1973 from the manufacturer M/s Hindustran Shipyards Limited from the bonded shipyard of the manufacturer. The case of the appellant revenue is that customs duty on a vessel taken for breaking up is leviable by virtue of fiction as if the vessel were then imported for the purpose of breaking up by virtue of Notification No. 163/F No.3/15/65 – CUS VII dated 19th October, 1965. 3. The case of the respondent was that respondent is not liable to be assessed the customs duty merely because Bill of Entry No.F-2/97-98 dated 20.5.1997 was filed by the respondent. Revenue did not accept the contention of the respondent and provisionally assessed duty to the tune of Rs.78,73,005/-. Respondent carried the matter in appeal before the Commissioner (Appeals) and failed. 4. Revenue carried the matter in appeal before the Tribunal, who for the reasons stated in order dated 24.5.2006, allowed the appeal. While doing so, Tribunal has taken note of the fact that no ship can be broken up for scrap except without prior permission granted by Director General of Shipping. That in the present case, such permission was granted to Shipping Corporation of India Limited by the Director General of Shipping on 4.4.1997. The Tribunal has placed reliance on the ratio of the Apex Court decision in case of Union of India v. Jalyan Udyog, TAXAP/1430/2006 4/6 JUDGMENT 1993(68) ELT 9. 5. On behalf of appellant revenue, the learned counsel pleaded that the Bill of Entry had been filed by the respondent and hence the respondent was required to be treated as an importer within the meaning of provisions of section 2(f) of the Customs Act, 1962 (the Act). That even as per Memorandum of Agreement between the respondent and Shipping Corporation of India vide clause 3, payment of customs duty was the responsibility and liability of the buyer respondent. It was therefore, urged that the Tribunal had committed an error in holding that respondent was not liable to pay customs duty as an importer. It was further contended that the Tribunal had also placed reliance on its own decision in case of Commissioner of Customs v. Devkrupa Ship Breakers which matter had been carried before this High Court and thereafter, before the Apex Court. That vide order dated 26.3.2007, Supreme Court had held that substantial question of law arose and it needs consideration. 6. In the case of Jaliyan Udhyog (supra), the Apex Court has observed as under: (page 20) 20. We are, however, of the opinion that since the date of breaking-up is an uncertain event and may require an enquiry in each case and also because no ship can be broken-up or scrapped except under the prior permission granted by the Director General of Shipping, the date of breaking-up contemplated by the said proviso should be deemed to be the date on which the permission for scrapping/breaking is accorded by the Director General of Shipping. This clarification is made in the interest of certainty and to obviate avoidable controversy. It is with reference to such date that the value and the rate have to be determined. If on such date, any other procedural formalities prescribed by law are to be complied with, they too have to be complied with. The aforesaid observations have been made after considering TAXAP/1430/2006 5/6 JUDGMENT provisions of section 15 of the Act which relates to date for determination of rate of duty and tariff valuation on imported goods. The Apex Court has also taken note of the scheme of the Act by referring to provisions of section 46 of the Act which relate to presentation of Bill of Entry in case of goods entered for home consumption. 7. The notification, on which revenue is placing reliance, reads as under: (Department of Revenue) CUSTOMS New Delhi, the 19th October, 1965 S.O. 3183 – In exercise of the powers conferred by sub section (1) of section 25, read with sub-section (3) of section 160, of the Customs Act, 1962 (52 of 1962) and in suppression of the notification of the Government of India in the Ministry of Finance (Department of Revenue) No.118 dated the 13th June, 1965, the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts any ocean-going vessel manufactured in a warehouse in accordance with the provisions of section 65 of the said Act, from the duty of customs leviable thereon when cleared from the warehouse. Provided that the duty of Customs shall be levied on the vessel if it is broken up as if it were then imported to be broken up. (No.163/F.No.3/15/65 – Cus. VII) G.P. Durairaj, Dy., Secy. 8. Applying the ratio of the Apex Court decision to the facts of the case, it becomes apparent that an ocean-going vessel, which is TAXAP/1430/2006 6/6 JUDGMENT manufactured in a warehouse, is exempted from duty of customs leviable when cleared from the warehouse but such duty of customs shall be levied on the vessel if it is broken up as if the vessel were then imported to be broken up. In the present case, as noted by the Tribunal, Shipping Corporation of India was granted permission on 4.4.1997 by the Director General of Shipping. In the circumstances, the customs duty, which had been deferred by virtue of notification, became leviable on 4.4.1997 as laid down by the Apex Court. Merely because the Memorandum of Agreement provides for the purchaser to discharge the liability on behalf of the seller, the liability in law which is fastened on 4.4.1997, cannot become the liability in law of the respondent. 9. In the aforesaid set of facts and circumstances of the case, no question of law, as proposed or otherwise, can be stated to arise out of impugned order of Tribunal so as to be treated as a substantial question of law, the issue being concluded by the decision of the Apex Court. The appeal is accordingly dismissed. (D.A. MEHTA, J.) (HARSHA DEVANI, J.) shekhar/-