Excise duty on ships for breaking - do they manufacture ships just for breaking up?
Do you know ship breaking is excisable? But what is excise duty on ships for breaking up? Nobody manufactures ships for breaking up and the duty on ships is nil as per the tariff. Is it that passenger and cargo ships are charged to nil duty while ships for breaking up are to attract 16% duty? Certainly old ships sold for breaking up cannot suffer excise duty. What then is the mystery?
The whole purpose seems to be to tax imported ships for breaking up. Ships are routinely imported for breaking up and in addition to the basic customs duty they are required to pay an additional customs duty equal to the excise duty, commonly known as CVD. For this purpose ships for breaking up had to figure in the excise tariff and so it did though there was no excise duty collected at all.
So, the whole purpose was to collect CVD on imported ships for breaking up. And that is now quashed by the Gujarat High Court.
In a landmark judgement, the High Court held that no additional duty is leviable on the vessels and other floating structures imported into India for breaking up, under section 3(1) of the Customs Tariff Act, 1975, as per the rate prescribed under heading No.89.08 of the Central Excise Tariff Act, 1985. Consequently, demand, if any, of such additional duty with respect to respective Bills of Entry is quashed and set aside.
The Gujarat High Court relied heavily on the Supreme Court Judgement in Hyderabad Industries Ltd. Versus Union of India, reported in - , wherein it was held:
when articles which are not produced or manufactured cannot be subjected to levy of excise duty then on the import of like articles no additional duty can be levied under the Customs Tariff Act. The levy of additional duty being with a view to provide for counter balancing the excise duty leviable, we are clearly of the opinion that additional duty can be levied only if on a like article excise duty could be levied.
This appeal was filed in 1995 - nearly twenty years ago, but that was worth waiting for - all those who did not pay, need not pay; all those who did, may not get any refund.
The bright boys in the North Block will have to break their heads on this issue. They may not succeed in Supreme Court as the High Court relied on a Supreme Court Judgement. Retrospective legislation on the way?
In Notification No. 12/2012-Cus dated 12.03.2012, in Sl. No. 461, vessels for the transport of persons or goods, falling under heading 8901 (excluding those which are imported for breaking up) are fully exempt from payment of import duty subject to the condition:
If the vessels and other floating structures are intended to be broken up after their importation, the importer shall present a fresh bill of entry to the Commissioner of Customs, and thereupon such goods shall be chargeable with the duty which would be payable on such goods as if they were entered for home consumption, under section 46 of the Customs Act, 1962 (52 of 1962), on the date of the presentation of such fresh bill of entry, for the purposes of break-up of such goods.
We bring you this landmark judgement.
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