Exemption for ship stores applies only to complete vessels, not goods supplied for use during construction.

An exemption for goods supplied as stores for consumption "on board a vessel" applies only where the vessel is already complete and in existence. Goods supplied to shipbuilders for use in a vessel still under construction do not qualify, because the phrase does not extend to components or equipment furnished before the vessel comes into existence. Chapter Note 1 of Chapter 89 does not enlarge the notification, and the definition of "stores" under the Customs Act supports this narrower reading. Earlier decisions on the same notification were followed, and the exemption was held unavailable for vessels under construction.

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Issues: Whether the exemption under the notification for goods supplied as stores for consumption on board a vessel of the Indian Navy extended to goods supplied to shipbuilders for use in a vessel still under construction.

Analysis: The exemption was held to depend on the goods being supplied as stores for consumption on board a vessel already in existence. The phrase "on board a vessel" was construed to mean a complete and finished vessel, not an incomplete or unfinished vessel under construction. The reference to Chapter Note 1 of Chapter 89 did not enlarge the scope of the notification, and the definition of "stores" under Section 2(38) of the Customs Act, 1962 supported the view that the benefit covered goods used in a vessel, not components or equipment supplied before the vessel came into existence. Earlier decisions on the same notification were followed.

Conclusion: The exemption was not available to goods supplied to shipbuilders for vessels under construction, and the Commissioner's order dropping the proceedings was set aside.

Final Conclusion: The matter was remitted to the Commissioner for quantification of duty liability and fresh decision in accordance with law, with the Revenue succeeding on the substantive exemption issue.

Ratio Decidendi: An exemption limited to stores supplied for consumption "on board a vessel" applies only when the vessel is already complete and in existence, and it does not extend to goods supplied for use in a vessel under construction.

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