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Issues: (i) Whether special additional duty of customs was leviable on old ships imported for breaking up and whether exemption under Notification No. 56/98-Cus. was available. (ii) Whether fuel and oil and foodstuff on the imported ships were chargeable separately to customs duty or could be treated as part of the vessel.
Issue (i): Whether special additional duty of customs was leviable on old ships imported for breaking up and whether exemption under Notification No. 56/98-Cus. was available.
Analysis: The exemption under the notification was confined to goods imported for sale "as such" with the prescribed declaration. The imported ships were not sold as such; they were broken up and the materials obtained from dismantling were sold. Such sale of dismantled materials could not be equated with sale of the imported ships in their original form. The goods resulting from breaking up were also treated as arising from manufacturing activity. The notification, therefore, did not extend to the import of ships for breaking and the levy of special additional duty was attracted.
Conclusion: The exemption was not available and special additional duty of customs was leviable against the assessee.
Issue (ii): Whether fuel and oil and foodstuff on the imported ships were chargeable separately to customs duty or could be treated as part of the vessel.
Analysis: Sections 86 and 87 apply only to ship stores on a foreign going vessel, and the imported vessels meant for breaking did not answer that description. Under the Board circular, fuel and oil contained in the vessel, machinery and engine could be treated as part of the vessel, while remaining fuel and oil and ship stores such as foodstuff were classifiable separately. On that basis, fuel and oil in the engine room tanks were to be assessed with the ship, whereas fuel and oil in other tanks and foodstuff were liable to separate classification and duty.
Conclusion: The assessee succeeded only in respect of fuel and oil in the engine room tanks, while fuel and oil in other tanks and foodstuff were chargeable separately to duty.
Final Conclusion: The appeals succeeded only to the limited extent of treating fuel and oil in the engine room tanks as part of the vessel, while the levy of special additional duty on the imported ships and separate duty on the remaining fuel, oil and foodstuff were upheld.
Ratio Decidendi: An exemption for goods imported for sale "as such" does not cover ships imported for breaking up and sold only after dismantling, and ship-stores exemptions apply only to foreign going vessels; fuel and oil integral to the vessel may be assessed with it, but remaining stores are separately dutiable.
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