- (1.) The respondent herein impugned the validity of Notifications Nos.102/87-CE and 103/87-CE, both dated 27.03.1987, whereby whole of the duty of excise was exempted in respect of iron and steel scrap obtained by breaking the ship subject to the condition that customs duty should have been levied at the rate of Rs.1400/- per Light Displacement Tonnage (LDT). With the stipulation of such a condition, giving the exemption of payment of excise duty only to those who had paid customs duty at Rs.1400/- per LDT, another class of persons who also paid custom duty under Section 3 of the Customs Tariff Act, 1975, albeit at a lesser rate, was excluded. The respondent who belonged to excluded category, had challenged the said Notification as arbitrary and violative of Article 14 of the Constitution. Though the learned Single Judge dismissed the writ petition, the Division Bench in appeal has accepted the aforesaid plea of the respondent and vide judgment dated 18.08.2003 held that the second category of persons shall also be entitled to the benefit of this Notification. It is this judgment which is impugned by the Union of India and is the subject matter of the instant appeal.
(2.) The facts which are relevant to the aforesaid controversy need to be traversed at this stage. These are as follows: The respondent herein is engaged in the business of ship breaking activities. It had imported a foreign vessel "M.V. Gonong Mass" for the purpose of breaking it and selling it as scrap. This ship was purchased by the respondent as a successful tenderer for a sum of Rs.61 lakhs and at the time of import, the Collector of Customs, Cochin, assessed the custom duty and additional duty payable under Section 3 of the Customs Tariff Act, 1975 on this ship on ad-valorem basis and customs duty in the sum of Rs.62,16,796.55 was levied on the movable articles in the ship; body of the ship was assessed at 30% and 50% ad-valorem and additional custom duty i.e. countervailing duty at 12% ad-valorem. The respondent also paid a sum of Rs.5,68,660/- as sales tax.
(3.) After import of the ship, the same was dismantled and broken from which iron and steel scrap was taken out. This iron and steel scrap is exigible to excise duty. The respondent has registered itself under the Central Excise Act. The aforesaid iron and steel scrap which was obtained by breaking the ship was cleared by the respondent on payment of central excise duty at the rate of Rs.365/- per tonne as per Notification No.146/86- CE dated 01.03.1986. Upto this point, there is no dispute. The relevant period with which we are concerned is from 08.08.1986 to 27.07.1987. During this period, the following materials were cleared: JUDGEMENT_71_LAWS(SC)7_2015_1.html;