ORDER
1. The liability of additional duty of customs have been challenged in these writ petitions. The petitioner is carrying on the business of ship breaking and importing vessels for ship breaking. Attention is drawn to the Budget Speech of Finance Minister, for the year 1993-94 delivered on 27-2-1993 which is to be the following effect:
'91. The Ship Breaking Industry is employment intensive and an important source of raw materials for the secondary sector of our steel industry. In order to encourage the growth of this industry, I propose to prescribe a lower merged duty of customs at 5% ad valorem. The ferrous materials obtained from breaking up of such ships etc., which are presently subject to excise duty are being fully exempted'.
2. On 3-8-1993 the petitioner presented a bill of entry claiming classification of vessel under Chapter 89.08.00 of the Customs Tariff Act, read with Notification No. 74/93, dated 28-2-1993 to the Customs Appraiser. 5% ad valorem was paid. The dispute was only with regard to the additional duty which was stated to be billed under notification No. 167/86 CE, dated 1-3-1986 read with Notification No. 44/93 CE, dated 28-7-1993. The customs authorities have not agreed with the contention and an additional duty of Rs. 93,08,030/- was levied. The contention of the petitioner is that since there was full exemption from the Central Excise Duty under notification dated 1-3-1986 there was no liability to pay the additional customs duty. It was also claimed that under notification dated 28-2-1993 the goods falling under heading 89.08.00 of I Schedule to the Customs Tariff Act, 1975, when imported into India are exempt from so much of the duty of customs leviable thereon as in excess of the amount calculated at the rate of 5% ad valorem. The duty so determined has already been paid and is not in dispute.
3. Section 3 of the Customs Tariff Act is as under:
'3. Levy of additional duty equal to excise duty.--(1) Any article which is imported into India shall, in addition, be liable to a duty (hereafter in this section referred to as the additional duty) equal to the excise duty for the time being leviable on a like article if produced or manufactured in India and if such excise duty on a like article is leviable at any percentage of its value, the additional duty to which the imported article shall be so liable shall be calculated at that percentage of the value of the imported article.
Explanation.--In this section, the expression 'the excise duty for the time being leviable on a like article if produced or manufactured in India' means the excise duty for the time being in force which would be leviable on a like article if produced or manufactured in India, or, if a like article is not so produced or manufactured, which would be leviable on the class or description or articles to which the imported article belongs, and where such duty is leviable at different rates, the highest duty'.
It is stated that the additional duty under Section 3 is payable equal to the excise duty which is livable chargeable on the article if produced or manufactured. Ships imported by the petitioner falls under Chapter 8908. It is claimed that by virtue of Notification No. 167/86 CE, dated 1-3-1986 the Central Government have exempted the goods falling under Chapter 89 from levy of excise duty in exercise of power conferred under sub-rule (1) of Rule 8 of Central Excise Rules, 1944.
3-A. Reliance is placed on the judgment given in the case of Amar Steel Industries v Collector of Customs, wherein it was observed that the rate of additional duty is directly linked with the rate of excise duty and since the rate of excise duty has been specified as 'Nil' by virtue of Notification No. 167/86 as the manufacturer have not used power in the process in relation to manufacture of goods, namely scrap by breaking the vessel there would be no liability of additional duty of customs.
4. Reliance is also placed on the judgment given in the case of Hyderabad Industries Limited v Union of India , wherein the Asbestos fibres imported from out of India was held not liable to additional duty. The judgment given in the case of Khandelwal Metal and Engineering Works Limited v Union of India , was reconsidered. In the majority judgment Kirpal, J. observed that the explanation to Section 3 of the Customs Tariff Act, 1975 has two limbs:
'The first limb clarifies that the duty chargeable under sub-section (1) would be the excise duty for the time being leviable on a like article if produced or manufactured in India. The condition precedent for levy of additional duty thus contemplated by the explanation is that the article is produced or manufactured in India. The second limb to the explanation deals with a situation where 'a like article is not so produced or manufactured'. The use of the word 'so' implies that the production or manufacture referred to in the second limb is relatable to the use of that expression in the first limb which is of a like article being produced or manufactured in India'.
It was further observed that the goods imported are to be presumed as manufactured or produced in India and then to see what amount of excise duty is liable thereon. For the purpose of determining the levy of customs duty on goods imported into India, Section 12 of the Customs Act was found relevant. For levy of additional duty Section 3 of the Customs Tariff Act, 1975 which is to be equal to the excise duty which is leviable under that Act, was considered relevant. This duty under Section 3 is in addition to any other duty imposed under the Customs Act or under any other law for the time being in force. While considering the case of M/s. Khandelwal Metal and Engineering Works, supra, it was observed that the levy of additional duty is to provide counter balance to the excise duty leviable and therefore, the additional duty can be levied only if on a like article excise duty could be levied. The question is as to whether the brass scrap can or cannot be regarded as a manufactured item was not decided. The asbestos fibre from the parent rock was held not a manufacturing process.
5. The decision in the case of Thermax Private Limited v Collector of Customs, Bombay , it was observed that it would not be correct to deny the concessions under Rule 192 of the Central Excise Rules, 1944 to a supplier of goods on the ground that he is an importer and not a manufacturer. An imaginary state of affair was to be considered that the importer had manufactured the goods in India and then the amount of excise duty was to be determined. In this case Sanyo Single Effect Chiller was imported from Japan for using in air conditioning/refrigeration.
6. On behalf of the respondents reliance is placed on the judgment given in the case of Khandelwal Metal and Engineering Works', supra. At the outset it may be observed that in Hyderabad Industries Limited's case, supra, it was held that
'. . . when articles which are 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 providing 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'.
The Constitution Bench in the case of Hyderabad Industries, supra, in respect of Asbestos Fibres which was imported from out of India, it was observed that, the condition precedent for levy of additional duty by explanation to Section 3 of Customs Tariff Act, 1975 is that the article is produced or manufactured in India. The second limb of the explanation deals with the situation that, if like article is not so produced or manufactured. The use of the word 'so' was interpreted to imply that the production or manufacture referred to in the second limb is relatable to the use of that expression in the first limb which is of a like article being produced or manufactured in India. It was considered that if an article is not manufactured or produced then there is no liability of duty. It was observed that the additional duty under Section 3 is equal to the excise duty for the time being leviable on the like articles which are imported into India, and a deeming fiction is to be created regarding production or manufacture in India.
The notes to clauses to the Customs Tariff Bill, 1975 were taken into consideration under which the additional duty on an imported article was to counter balance the excise duty leviable on the like article made indigenously, or on the indigenous raw materials, components or ingredients which go into the making of the like indigenous article. It was observed that legislative intent of providing for a charging section in the Tariff Act, 1975 for enabling the levy of additional duty to be equal to the amount of excise duty leviable on a like article if produced or manufactured in India was with a view to safeguard the interests of the manufacturers in India. Even though the impost under Section 3 is not called a countervailing duty there can be little doubt that this levy under Section 3 is with a view to levy additional duty on an imported article so as to counter-balance the excise duty leviable on the like article indigenously made. In other words Section 3 of the Customs Tariff Act has been enacted to provide for a level playing field to the present or future manufacturers of the like articles in India.
The decision given in the case of Thermax Private Limited, supra, was also taken into consideration and it was observed that.
'. . we have to forget that the goods are imported, imagine that the importer had manufactured the goods in India and determine the amount of excise duty that he would have been called upon to pay in that event'.
7. From the decision of the Supreme Court which has been stated above, it is clear that the additional duty of customs if leviable is equal to the excise duty leviable on the like articles which may or may not be produced in India. The levy of excise duty is itself on manufacture or production. There may be situation where an article is not produced in India but manufactured in a foreign country, then in that case the duty is leviable on the class or description of the article to which the imported article belongs. In the present case the article imported is vessels which are being manufactured in India also. For the purpose of giving concession to the ship-breaking units the excise duty has been provided at a lesser rate, if it is for breaking up. So far as the excise duty is concerned it is not in dispute that such duty is payable on the items manufactured with aid of power. For the purpose of additional duty the same is payable in accordance with the provisions of Section 3 equal to the excise duty for the time being leviable on a like article if produced or manufactured in India. It is claimed that under sub-rule (1) of Rule 1-A of Central Excise Rules exemption has been given in respect of goods falling under Chapter 89 as per notification dated 1-3-1986 from levy of duty of excise. Since the exemption has been given from the duty of excise leviable, therefore, additional duty also cannot be levied.
8. On behalf of the respondent it is stated that the petitioner has not availed the statutory remedy of appeal provided under the Customs Act against the order of assessment passed and that exemption granted under Rule 8(2) under Central Excise Rules, 1944, does not automatically grant exemption in respect of the additional duty leviable under Section 3 of the Customs Tariff Act, 1975. It is also stated that the forged documents have been filed but the details of such documents have not been given. The importer is stated to be liable for prosecution under Section 132 of Customs Act, 1962. It is stated that Notification No. 74/93 is applicable for exemption only in respect of basic customs duty and the notification dated 27-3-1987 under Section 25 of the Customs Act, 1962, exemption is granted in respect of customs duty and additional duty but the Notification No. 74/93 exemption is restricted to the basic duty of customs. It is stated that the petitioner has never claimed the benefit of notification dated 1-3-1986. The Notification No. 167/86 is giving exemption under Rule 8 of Central Excise Rules, 1944 from the Central Excise Duty in respect of the goods produced in India without the aid of power falling under Chapter mentioned therein.
9. On behalf of the respondent reliance is placed on the judgment in Jalyan Udyog v Union of India, wherein it was observed that the contention that ship imported by them for the purpose of breaking up is not being manufactured in India nor is capable of being manufactured in India and as such is not liable to pay additional duty or countervailing duty, has no substance.
10. I have considered over the matter. As observed above, it is not in dispute that the ships imported by the petitioner is a commodity which is manufactured in India. The benefit which is claimed by the petitioner under Notification No. 167/86 CE dated 1-3-1986 is exemption from the duty leviable under Central Excise Tariff Act. That is possible if the item is manufactured or produced without the aid of power and falls in any of the categories mentioned in the table, then the duty of excise is not leviable thereon. What the petitioner submits is that the product manufactured from an imported item is exempt from excise duty would make the imported item exempt. This is not the correct interpretation. After the ship is imported, the ship breaking industry dismantle the same and in the process there are number of items obtained therefrom. It is the item which is imported on which the liability of additional duty is to be considered and not on any processed or manufactured items therefrom. Even in the case of Thermax Private Limited, supra, wherein Sanyo Single Effect Chiller was imported for using in refrigeration/air-conditioning, The effective rate of duty in respect of the parts so imported was considered and not of finished product. There may be hundreds of items falling in different chapters and heads which are manufactured from the imported or indigenous items. The Notification No. 167/86 CE, dated 1-3-1986 exempts the finished products from levy of excise duty provided that in relation to manufacture of such goods no aid of power is taken. If the raw material is imported from out of India then for the purpose of additional duty it is to be seen as to whether on such raw material which may be manufactured from other raw material any excise duty is leviable under Section 3 of the Act. If no such duty of excise is leviable on such raw material if manufactured in India or capable of being manufactured in India or even not manufactured in India and have been received in India after manufacturing, then the additional duty of excise is not leviable. But if any item is imported and is used in the manufacture then the exemption is to be given on the item imported and not the goods manufactured therefrom. The ship which has been imported from out of India is not manufactured without the aid of power and there is no exemption from excise duty under any of the notifications, under Section 3 and as such by no stretch of imagination the petitioner can claim the benefit of notification dated 1-3-1986 that gives exemption to the items falling under different heading and chapters mentioned therein which are manufactured in India without the aid of power. The ship which has been imported by the petitioner do not fall under any of the Chapter Heading of notification dated 1-3-1986. Theexemption under the said notification is for the manufactured or produced item without aid of power and since the manufactured product being ship, petitioner cannot claim the benefit on the basis that the scrap obtained by breaking material process or obtained by material would also be exempt. There is no notification issued under Section 25 of the Customs Act granting exemption from additional duty nor there is any notification by which the exemption is given to the ships. The reference to goods falling under Chapter 89 and notification dated 1-3-1986 is in respect of goods which are manufactured in India without the aid of power.
11, Section 3 of Customs Tariff Act, 1975 has provided for levy of additional duty equal to excise duty. This additional duty is leviable on a like article, if produced or manufactured in India, is leviable. In the case of Hyderabad Industries Limited, supra, it was observed that, when articles which are not produced or manufactured they cannot be subjected to levy of excise duty. As such, on 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 providing for counter balancing the excise duty leviable, the additional duty can be levied only if on a like article excise duty can be levied. Under explanation to Section 3(1), it is provided that if the article is not so produced or manufactured, then the excise duty for the time being leviable on a like article if produced or manufactured in India would be on the basis of class or description of article to which the imported article belongs. The law laid down by the Apex Court, therefore, is clear that unless the article imported is a manufactured product which may or may not be manufactured in India, the additional duty under Section 3 cannot be levied. Examining in the light of this decision it is to be seen firstly, as to whether the article imported is manufactured or not. The article imported is a ship and the floating structures for breaking up under Heading 08 of Chapter 89 providing the lesser rate of duty is because the vessels and floating structures are used for breaking up. The words 'for breaking up' is only the use of the commodity. But it is to be seen as to whether the vessels and other floating structures are manufactured or capable of being manufactured in India. The Notification No. 167/86-CE, dated 1-3-1986 giving the exemption falling under Chapter 89 could be claimed, if no process in or in relation to the manufacture of the said goods is ordinarily carried on with the aid of power. Chapter 89 refers to ships, boats and floating structures and it has various items enumerated therein. The words in relation to 'manufacture of goods' in the notification dated 1-3-1986 refers to the ships imported by the petitioner. The contention that, no ships are manufactured for breaking up, has no substance because it is vessel or floating structure which is being manufactured, and the category of the item under Section 3 of the Customs Tariff Act refers to the class or description of the article and not the use of it. Since the vessels and floating structures are not manufactured without the aid of power, the benefit of notification dated 1-3-1986 cannot be claimed.
12. The notification dated 28-2-1993 also granted exemption from the basic duty that have been issued under Section 25(1) of the Customs Act, 1962. The petitioner has submitted a copy of the notification dated 28-2-1993. From that notification, the goods and materials falling under Chapters 72 and 73 of Schedule to the Central Excise Tariff Act obtained by breaking up of ships, boats and other floating items have been prescribed for exemption from duty. In respect of additional duty of excise the ultimate product which has been obtained in India is not to be taken into consideration. The decision given by the Calcutta High Court has not considered this aspect of the matter. In view of the interpretation of the notification dated 1-3-1986 the petitioner is liable for payment of additional customs duty. The benefit of notification dated 28-2-1993 in respect of exemption of excise duty on the goods and materials obtained by breaking up of the ship and boat cannot be availed in respect of a ship imported.
13. The petitions, therefore, have no force and are accordingly dismissed.
Regarding the submission of the learned Standing Counsel for the Department that, the petitioner has submitted forged documents and is liable for prosecution, it is for them to take action under Section 132 of the Customs Act, 1962 and no permission of this Court is needed.