- (1.) Special leave granted.
(2.) We have heard learned counsel for the parties.
(3.) Respondents (hereinafter referred to as 'the petitioners') are engaged in the business of breaking or dismantling of old unserviceable ships. They carry on the said business at their ship breaking yard at Alang and Sachana in the State of Gujarat. Old ships/ vessels are imported by Metal Scrap Trading Corporation Ltd. (for short MSTC), a canalising agency for importing old and unserviceable ships and vessels for breaking. Ships and vessels are allotted to the ship breakers who are registered with MSTC. The petitioners are registered ship breakers who obtain the ships and vessels from MSTC. After dismantling/breaking the old vessels, the petitioners sell the metal scrap in open market. In 1985, the Central Excise authorities took the view that dismantling or breaking of old unserviceable ships constitutes 'manufacture' within the meaning of Section 2(f) of the Central Excises and Salt Act, 1944 (hereinafter referred to as 'the Act') and the petitioners were, therefore, required to pay excise duty on the said material and in this connection show cause notices were issued requiring them to show cause as to why duty of excise leviable under Tariff Item 25(d) of the erstwhile Central Excise Tariff Act be not levied and collected on the materials arising from breaking or dismantling of ships. The petitioners filed writ petitions under Article 226 of the Constitution in the Gujarat High Court wherein they submitted that the scrap recovered from breaking or dismantling of old unserviceable ships was not leviable to excise duty under the Act and they prayed for an injunction restraining the excise authorities from levying or collecting duty of excise on such scrap or interfering with clearance or removal of such scrap by the said petitioners. In the said writ petitions the Gujarat High Court had passed an interim order on November 29, 1985 whereby it was directed : "............. pending hearing of the petitions, the petitioners shall be entitled to clear the goods on payment of 25% of the Central Excise duty payable on the goods cleared, on condition that the petitioners shall execute personal bonds before the concerned authority of Central Excise and Customs without any surety or security to pay the balance of 75% of the amount of excise duty in dispute in the event of the petitions being dismissed. .........It is also clarified that the question regarding refund of 25% of the duty of excise paid by the concerned petitioners pursuant to the present order shall abide by the final direction that may be issued by this Court after hearing the concerned parties on all relevant points, if ultimately the petitioners succeed in the petitions.;