Additional customs duty on ship-breaking vessels fails where the like domestic article is fully excise-exempt.

Additional duty of customs under section 3 of the Customs Tariff Act is chargeable only when a like article produced in India would attract excise duty. On the facts discussed, vessels imported for breaking up fell within the same tariff language as the corresponding indigenous article, and the excise exemption under Notification No. 167/86-C.E. meant the domestic article carried no duty. The Budget Speech was treated as a relevant interpretive aid supporting the ship-breaking exemption, and the rule favouring the assessee where two tax interpretations are possible reinforced that view. The demand for additional duty was therefore unsustainable.

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Issues: Whether vessels imported for breaking up were liable to additional duty of customs under section 3 of the Customs Tariff Act, 1975, notwithstanding the exemption from excise duty under Notification No. 167/86-C.E. dated 01.03.1986, and whether the Finance Minister's Budget Speech could be used to construe the levy.

Analysis: Section 3 of the Customs Tariff Act levies additional duty equal to the excise duty for the time being leviable on a like article if produced or manufactured in India. The vessels in question were imported only for breaking up, and breaking of vessels was carried on without the aid of power. Chapter 89 of the Central Excise Tariff and the corresponding customs heading for vessels for breaking up were treated as having identical language. Since Notification No. 167/86-C.E. exempted goods falling under Chapter 89 from the whole of excise duty where no process in or in relation to manufacture was carried on with the aid of power, the court held that the additional duty must also be nil if the like indigenous article would attract no excise duty. The Budget Speech was treated as a relevant aid to construction, and the legislative purpose of encouraging the ship-breaking industry supported the same interpretation. The court also applied the settled principle that where two views are possible in taxation, the one favouring the assessee should be adopted.

Conclusion: The imported vessels for breaking up were not liable to additional duty of customs, and the demand raised by the department could not be sustained.

Final Conclusion: The appeals succeeded and the writ petitions were allowed, with the assessment orders and the single judge's decision set aside.

Ratio Decidendi: Additional duty under section 3 of the Customs Tariff Act is chargeable only where a like article, if produced or manufactured in India, would attract excise duty; if the corresponding indigenous article is fully exempt, the imported article cannot be subjected to additional duty.

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