Input credit restriction on ship-breaking goods applies to ship-breaking in India, regardless of vessel origin, when tariff headings match.

Credit under Notification No. 177/86-C.E. (N.T.) was held to be restricted for specified inputs obtained from ship-breaking where the tariff description matched Headings 72.15 and 73.09. The notification was construed as applying to ship-breaking carried out in India, and not as limited to inputs derived only from Indian-origin vessels. The attempt to distinguish the goods by reference to the ship's origin was rejected, and a separate notification was held not to change the result. The restriction therefore applied to the assessee.

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Issues: Whether credit on inputs obtained from ship-breaking was restricted under Notification No. 177/86-C.E. (N.T.) dated 1-3-1986, and whether the restriction applied only to inputs derived from Indian-origin ships.

Analysis: The notification restricted credit in respect of specified inputs falling under Headings 72.15 and 73.09 obtained from breaking up ships, boats and other floating structures manufactured in India, subject to the stated monetary cap. The wording was construed to cover inputs derived from ship-breaking carried out within India, irrespective of whether the ship was of Indian or foreign origin. The contention that the notification applied only to Indian-made ships was rejected. The description of goods under the relevant tariff headings was also found to cover the inputs in question, and the distinction sought to be drawn from another notification was held not to alter the result.

Conclusion: The restriction on credit applied to the assessee, and the appeal failed.

Ratio Decidendi: Where a notification restricts credit on inputs obtained from ship-breaking by reference to the manner and place of manufacture, the restriction is attracted to goods derived from ship-breaking within India regardless of the origin of the vessel, if the tariff description otherwise matches the notified headings.

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