Ship-breaking goods qualify for exemption under the tariff description, with trade purchases presumed duty paid and confiscation unsustainable.

Goods obtained from ship-breaking were treated as eligible for exemption under Notification No. 208/83 when they fell within the covered tariff description, including Heading 72.15 under the new tariff regime. Inputs purchased from trade under the old tariff regime were presumed to be duty paid unless clearly shown otherwise, so the exemption was available on that basis. Direct purchases from ship-breakers were allowed only on proof of duty payment, and that limited question was remanded for reconsideration. Where exemption applied, confiscation had no basis and was set aside.

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Issues: (i) Whether exemption under Notification No. 208/83 was available in respect of inputs arising from ship-breaking under the new tariff regime; (ii) Whether the same notification applied to materials purchased from trade under the old tariff regime and to direct purchases from ship-breakers on proof of duty payment; (iii) Whether confiscation of the goods was sustainable when exemption was available.

Issue (i): Whether exemption under Notification No. 208/83 was available in respect of inputs arising from ship-breaking under the new tariff regime.

Analysis: The notification granted exemption to goods falling within the specified sub-headings, and Heading 72.15 covered goods and materials obtained by breaking up ships, boats and other floating structures. The reasoning followed the earlier Tribunal view that ship-breaking goods retained eligibility for the notification even though duty had been paid under Heading 72.15 under the new tariff.

Conclusion: The exemption was available to the assessee for the new tariff period, and the duty demand for that period was set aside.

Issue (ii): Whether the same notification applied to materials purchased from trade under the old tariff regime and to direct purchases from ship-breakers on proof of duty payment.

Analysis: For the old tariff period, the governing principle was that inputs purchased from the trade were to be presumed duty paid unless clearly shown otherwise. On that basis, ship-breaking materials purchased from the trade were entitled to the benefit of the notification. For direct purchases from ship-breakers, the benefit was made available where proof of duty payment was produced, and the matter was sent back for reconsideration to that limited extent.

Conclusion: The exemption was allowed for trade purchases under the old tariff regime, and the question of direct purchases from ship-breakers was remanded for limited reconsideration.

Issue (iii): Whether confiscation of the goods was sustainable when exemption was available.

Analysis: Confiscation depended on the denial of exemption. Once the goods were held eligible for exemption, the basis for confiscation ceased to exist.

Conclusion: The confiscation was set aside.

Final Conclusion: The assessee succeeded on the exemption issue for the new tariff period and for trade purchases under the old tariff period, with only the limited question of direct purchases from ship-breakers remanded for reconsideration, and the confiscation was annulled.

Ratio Decidendi: Goods obtained from ship-breaking are eligible for exemption under the notification when they fall within the covered tariff description, and inputs purchased from trade are presumed duty paid unless clearly shown to be non-duty paid.

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