Repair spares for ocean-going vessels qualify for customs exemption when imported by a registered ship repair unit.

Imported replacement handsets used to repair the communication system of an ocean-going vessel by a ship repair unit registered with the Director General of Shipping were treated as exempt under Notification No. 21/2002-Cus. The notification covered capital goods, spares, raw materials, parts, material handling equipment and consumables used for repairs of ocean-going vessels, and the handset was characterised as a repair-related spare rather than an independent commercial import. On that basis, the import fell within the exemption and denial of benefit was held unsustainable.

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Issues: Whether the imported handset, meant to replace a defective handset in the communication system of an ocean-going vessel and imported by a registered ship repair unit, was eligible for exemption under Notification No. 21/2002-Cus dated 28/02/2001.

Analysis: The exemption covered capital goods, spares, raw materials, parts, material handling equipment and consumables used for repairs of ocean-going vessels by a ship repair unit registered with the Director General of Shipping, Government of India. The imported handset was not an independent commercial import but a replacement part for the ship's communication system. In light of the notification language and the earlier tribunal decision relied upon, the import fell within the scope of repair-related exempt goods.

Conclusion: The handset was eligible for exemption under the notification, and the denial of benefit was unsustainable.

Ratio Decidendi: Goods imported as replacement spares for repair of an ocean-going vessel by a duly registered ship repair unit are covered by the exemption when the notification extends to spares used for such repairs.

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