Ship-breaking scrap exemption upheld where Board directions and notification barred confirmation of duty demand

Scrap generated from ship-breaking activity during the relevant period was covered by the applicable exemption notification, and the Board's directions required Commissioners to drop recovery proceedings after the Government undertook not to press recovery before the High Court. On that basis, the Commissioner accepted that the appellants were eligible for exemption on scrap cleared during the period. The duty demand on the ship-breaking scrap was therefore not sustainable and could not be confirmed.

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Issues: Whether duty could be confirmed on scrap generated from ship-breaking activity for the relevant period in view of the exemption notification and the Board's directions.

Analysis: The demand related to dismantling, breaking and cutting of ships, with duty sought on the scrap generated during the specified period. The record showed that the Government had given an undertaking before the High Court not to press recovery for that period, and on that basis the Board had directed the Commissioners to drop proceedings. The Commissioner also confirmed that, under Notification No. 386/86-C.E. and the referenced Board circular, the appellants were eligible for exemption on the scrap cleared during the relevant period.

Conclusion: The duty demand was not sustainable and could not be confirmed.

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