Ship-breaking duty and valuation turn on vessel entry into territorial waters, not later damage or original sale price.

Duty on a vessel under the exemption notification for ocean-going vessels and ship-breaking was held to remain leviable even though the vessel was damaged and later broken up, because the levy attached on import and entry into territorial waters, while chargeability arose on breaking up. The proviso was treated as referring to the vessel's status at entry, so later wrecking or salvage did not exclude duty. Valuation was required to be fixed by customs authorities on relevant statutory factors rather than the original sale price, with value assessed by reference to the time of entry into territorial waters and the duty rate linked to the date of filing the bill of entry.

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Issues: (i) whether duty was leviable on the vessel under the exemption notification governing ocean-going vessels and ship-breaking, despite the vessel being damaged and later broken up; (ii) whether valuation and the rate of duty had to be determined with reference to the vessel's entry into the territorial waters and the date of filing of the bill of entry.

Issue (i): Whether duty was leviable on the vessel under the exemption notification governing ocean-going vessels and ship-breaking, despite the vessel being damaged and later broken up.

Analysis: The exemption notification was held to link the levy to the import of the vessel when it entered the port, while the actual chargeability arose on the act of breaking up. The condition in the proviso was treated as referring to the vessel's status when it entered the territorial waters, and the subsequent wrecking or salvage did not take the case outside the levy.

Conclusion: Duty was held to be rightly leviable on the vessel.

Issue (ii): Whether valuation and the rate of duty had to be determined with reference to the vessel's entry into the territorial waters and the date of filing of the bill of entry.

Analysis: Section 21 was held inapplicable on the footing that what entered the port was not a wreck. The original sale price was not treated as conclusive of value, and the proper value was required to be ascertained by the authorities having regard to relevant attendant factors. The value was to be taken as prevailing when the ship entered the territorial waters, while the rate depended on the date of filing of the bill of entry.

Conclusion: Valuation was held to be determinable by the authorities with reference to the 1978 entry into territorial waters, and the duty rate was linked to the date of filing of the bill of entry.

Final Conclusion: The writ petition failed on the core challenge to duty liability, and the matter was disposed of with the levy upheld and valuation left to be determined in accordance with the applicable customs framework.

Ratio Decidendi: In ship-breaking cases, the duty charge is linked to the import of the vessel on entry into territorial waters, and valuation is to be determined by the customs authorities on relevant statutory criteria rather than by the original sale consideration.

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