Customs, Excise and Gold Tribunal - Calcutta
Bengal Hammer Industries (P) Ltd., Ram ... vs Commissioner Of Central Excise, ... on 28 September, 2001
Equivalent citations: 2002(139)ELT601(TRI-KOLKATA)
JUDGMENT
G.R. Sharma
1. These are four appeals. Since these four appeals arise out of the same common Order-in-Appeal No. 80-83/Cal.1/95 dt. 30.10.95, therefore, they were heard together and are being disposed of by this common order.
2. The facts of the case in brief are that the appellants are engaged in ship-breaking activities. The Department directed the appellants in October and Nov' 85 to take Cental Excise License and to remove goods obtained by ship-breaking activity after discharging the duty liability as the ship-breaking activity after discharging the duty liability as the ship-breaking activity amounted to manufacture. The appellants filed writ petitions before the Hon'ble High Court against such directives and the Calcutta High Court passed an interim order directing deposit of certain amounts, execution of bond, taking out of License and removal of goods obtained by ship-breaking without payment of Central Excise Duty. The said writ petitions are finally disposed of on 2.5.86. Show Cause Notices were then issued by the Department to the appellants asking them to pay differential Central Excise Duty classifying the goods out of ship-breaking under Heading 72.15. Further writ petitions were filed by the appellants in the Hon'ble Calcutta High Court against the SCNs. The Hon'ble Calcutta High Court passed interim orders for giving final order in respect of the SCNs but not to realise the demand amount till the disposal of the writs. The demands, were confirmed. The Hon'ble Calcutta High Court dismissed the writ petitions in terms of their judgment dt. 29.1.88. The appellants filed an appeal before the Division Bench alongwith the stay petition for staying the Hon'ble High Court's order dt. 29.1.88 but the same were rejected. Against the judgment of the Division Bench, the appellants filed S.L.P. before the Hon'ble Supreme Court who disposed of the S.L.P. on 12.9.94 directing the appellants to move in appeal under Section 35A of Central Excise Act, 44. They filed appeals accordingly. The main contention of the appellants was that no manufacturing activity takes place when the ships and other floating vessels are dismantled/broken, and the goods obtained by breaking up of ships are not liable to duty as these items were classifiable under Chapter Headings 72.06 to 72.13 and that the old ships and floating vessels had already suffered Customs Duty and C.V. Duty on importation. Ld. Commissioner (Appeals) in his order concluded:
"In view of above, I find that the impugned goods having been obtained by breaking up of ships etc., merit classification under Chapter Heading No. 72.15 the rate of duty chargeable on such goods is @ Rs. 1800/- per m.t. according to CETA' 85. In view of foregoing discussions, all the four appeals by the respective appellants are hereby rejected being devoid of merit".
3. Arguing the case for the appellants Shri F.M. Razack, Ld. Counsel submits that the goods in question obtained by break-up of ships do not merit classification under chapter heading 72.15; that the impugned order is band in law as it was contrary to the judgment of Hon'ble Calcutta High Court in the case of S.S. Jain & Co. v. UOI reported in 1986 (25) ELT. 14; that the vessel purchased by the appellants is a composite component, such as steel plates, planks, furniture, bath-room fittings, engine, boilers etc; that when the ship is broken, the components/parts are seperated; in the result, the ship vanishes and in its place, there are various separate items; that it cannot be said that just because separate items emerge, these items have been manufactured by the process of dismantling.
Ld. Counsel submits that in the matter of dismantling a ship, the appellants do not embark on any manufacturing process at all; that in the dismantling of a ship, the appellants segregate the component units which form a part of the ship and such segregation does not entail any process of manufacturing; that no new product is obtained nor any process is involved which is incidental or ancillary to the completion of manufacturing process.
4. Ld. Counsel submits that in terms of the chart annexed to the Writ petition, it would be clear that the goods had not been produced or manufactured in the process of breaking up of the shop in question; that the finding of the Ld. Commissioner (Appeals) for imposing and realising duty @ Rs. 1800/- per m.t. was a sheer travesty of justice and was aimed at circumventing the judgment passed by the Hon'ble Court in May 2, 1986. Ld. Counsel submits that the authorities concerned could not levy Central Excise Duty on the items removed by the appellants after the Hon'ble Calcutta High Court judgment in the case of M/s. S.S. Jain and Ors. v. UOI; that in the instant case, materials which were obtained upon dismantling of the ld ships and vessels which were purchased, had not been specified to be a 'manufacturing process' and as such, the same could not be held liable to Central Excise Duty.
5. Ld. Counsel submits that the Hon'ble Calcutta High Court in their judgment dt. 2.5.86 had expressely declared Tariff Item No. 72.15 and 73.09 ultra vires the provisions of the said Act of 1944 in so far as duty is sought to be imposed on goods under Tariff Item No. 72.06, 72.07, to 72.13 and also goods and materials of Heading Nos. 73.03 to 73.08; that the Ld. Commissioner (Appeals) ought to have held that Article 265 of the Constitution of India, inter-alia, provided that no tax shall be levied or collected except by the authority of law; that the appellants had dismantled the said vessel by taking out or cutting through the rivets, nutes etc. whereby the said plates, sheets were held together; that the said sheets, plates angles and wire ropes etc. as described in Tariff Item Nos. 72.05 to 72.13 and 73.03 to 73.08 were the goods which were originally put together in order to form the said vessel which on dismantling continued to remain the same goods under the said Tariff Items and did not loose their identity on account of such dismantling; that the goods did not come within the purview of waste and scrap which had been described in Chapter 72 of the Central Excise Tariff as meaning 'waste and scrap' of iron and steel fit only for the recovery of metal or for use to the manufacture of chemicals but does not include slag, ash and other residues; that the appellants removed these goods; that these goods were never utilised for recovery of metal or for use in manufacture of chemicals.
Ld. Counsel submits that the Hon'ble Calcutta High Court in the case of S.S. Jain & Co. v. UOI and Ors. held that it would not be lawful for the Central Excise Authorities to levy or collect duty on any goods falling under Tariff Item 72.06 to 72.13 and 73.03 to 73.08 and that Tariff Item 72.15 and 73.09 were declared ultra-vires; that unless there is an activity of production, Section 3 (Three) of Central Excise Act, 44 is not attracted; that activity of dismantling has not been specified as amounting to manufacture hence no duty could be levied or collected. It was also contended that gate passes showed the relevant tariff headings which were not challenged; that it was not open to Central Excise authorities to allege that the entire materials removed by the appellant were waste and scrap under chapter heading 72.03 and leviable to duty. In support of this contention they referred to certificates issued by M/s. Normal Stewart & Co. Marine Surveyors & technical consultants.
It was also contended that the finding that goods were classifiable under chapter heading 72.15 was wrong in as much as the goods were classifiable under heading 72.06 to 72.13. Further that this finding of the Ld. Commissioner is contrary to the judgment of Hon'ble Calcutta High Court.
6. When Ld. DR shri A.K. Chattopadhaya pointed out to the decision of this Tribunal in the case of Ashish Steel Pvt. Ltd. v. CCE, Goa reported in 1999 (106) ELT. 269 holding that ship-breaking is to be considered as manufacturing activity under Cental Excise Tariff Act, 1985 as is evident from sub-heading 7215.00 and that no argument that the said activity is not a manufacture in terms of Section 2(f) of Central Excise Act, 44 can be accepted. Ld. Counsel submits that the decision of the Hon'ble Calcutta High Court in the case of S.S. Jain and Ors. v. UOI was not brought to the notice of the Tribunal and thus the decision of the Tribunal was perincuriam and therefore, cannot be cited as a precedent. It was further contended by the Ld. Counsel for the appellants that the Calcutta Bench of the Tribunal was within the jurisdiction of the Hon'ble Calcutta High Court and therefore, the decision of the Hon'ble Calcutta High Court in the case of S.S. Jain and Ors. v. UOI is binding on the Calcutta Bench of the Tribunal; that this decision of the Hon'ble Calcutta High Court was also binding on the Ld. Commissioner (Appeals).
Ld. DR further submitted that this decision of the Delhi Bench of this Tribunal has been confirmed by the Apex Court as reported in 2000 (108) ELT. A180 where under the Hon'ble Supreme Court dismissed the Civil Appeal filed by M/s. Ashish Steel Pvt. Ltd. against CEGAT's order. Ld. DR submits that according to the doctrine of merger which means that the decision under appeal merges with the Appellate order if the latter reverses, modifies or dismisses the appeal. Ld. DR submits that the Hon'ble Supreme Court in the case of S.S. Rathor v. State of M.P. reported in 1989 (43) ELT. 790 held "There is no justification in drawing the distinction between the Courts and the Tribunal in regard to the principles of merger. Accordingly, the order of the quasi judicial authority on appeal or revision merges in the appellate or revisionary orders".
7. Ld. Counsel for the appellant submits that the order of the Hon'ble Supreme Court affirming the order of Tribunal in the case of Ashish Steel Pvt. Ltd. v. CCE, Goa cannot be cited as precedent in-as-much as it was not a detailed order and the issue was not considered in detail.
8. On this argument of the Ld. Counsel, Ld. DR submits that the Apex Court in the case of Kunhayammed v. State of Kerala reported in 2001 (129) ELT. 11 in para 22 held "When appeal is dismissed, order of the High Court is merged with that of the Supreme Court. We find ourselves in entire agreement with the law so stated. We are clear in our mind that an order dismissing a special leave petition, more so when it is by a non-speaking order, does not result in merger of the order impugned into the order of the Supreme Court".
Ld. DR submits that int eh case of Ashish Steel Ltd. it is dismissal of the appeal filed by M/s. Ashish Steel Pvt. Ltd. and therefore, this ruling of the Hon'ble Supreme Court is applicable to the facts of the present case in toto.
9. Ld. DR also submitted that similar notices were issued in Gujarat. Matter went upto Supreme Court in the case of UOI v. Alang Ship Breakers Pvt. Ltd. [1993 (67) ELT. 449] in which the Apex Court held that "12. In that view of the matter, we are unable to uphold the direction given by the High Court for refund of 25% of Central Excise duty deposited by the petitioners"
Ld. DR, therefore, submits that the appeals may be rejected. He reiterated the findings of the Ld. Commissioner (Appeals). The reply of the appellant was that it was based on the consent order and hence not applicable to the facts of the present case.
10. We also note that reference was made to AIR 1963 SC. 1124 and AIR 1962 SC. 1513. But we find that they are not very relevant for our purpose in the present case.
11. We have heard the rival submissions. We find that the main dispute is whether the activity of ship-breaking amounts to manufacture. We note that this issue has been decided by the Delhi Bench of this Tribunal in the case of Ashish Steel Pvt. Ltd. v. CCE, Goa. The contention of the appellant was that this decision of the Delhi Bench of the Tribunal was perincuriam.
12. Incuria literally means carelessness. In practice perincurium appears to mean per ignoratium, English Courts have developed this principle in relaxation of the share decisis. We find that as a general rule only cases in which the decision should be held to have been given perincurium are those of decisions given in ignorance or forgetfulness or some inconsistant statutory provisions or of some authority binding on the Court concerned. A decision taken when refers to several decisions striking a different note cannot be considered as a precedent. A decision rendered perincurium is one in which statute or ruling having a statutory effect is not brought to the notice of the Court or decision is given in ignorance of a decision which is binding on the Court. In such a case the decision perincurium does not have way of a binding decision. Thus at the intermediary state, the decision of the Delhi Bench was perincurium but when affirmed by the Supreme Court on dismissal of the appeal it no longer remained a decision of the Tribunal. By the docrine of merger, it becomes a decision of the Supreme Court. Had the decision of the Tribunal not been appealed against before the Supreme Court, it would have suffered by being a decision perincurium but having been appealed against, it no longer remained a decision of the Tribunal to suffer its validity as being a decision perincurium.
We have also perused the decision of the Hon'ble Supreme Court in the case of Kunhayammed v. State of Kerala on the question of doctrine of merger. In para 22 of its judgment as indicated earlier, the Apex Court has ruled "When appeal is dismissed, order of the High Court is merged with that of Supreme Court".
This answer our query. In the instant case the appeal against the Tribunal's order was dismissed by the Apex Court and therefore, the order became that of the Apex Court. The Hon'ble Supreme Court in the case of Kunhayammed cited above in para 44(i) ruled:
"44. To sum up our conclusion are:
i) Where an appeal or revision is provided against an order passed by a Court, Tribunal or any other authority before superior forum and such superior forum modifies, reverses or affirms the decision put in issue before it, the decision by the subordinate forum merges in the decision by the superior forum and it is the latter which subsists, remains, operative and is capable of enforcement in the eye of law".
13. We reproduce Tariff Heading 72.15 as it then was as under:
"72.15 - Goods and materials of heading number 72.03, 72.06, 72.07, 82.08, 72.09, 72.10, 72.11, 72.12 and 72.13 obtained by breaking of ships, boats and other floating structures.
This Tribunal in the case of Ashish Steel Pvt. Ltd. v. CCE, Goa had in para 6 & 7 observed:
"6. We have considered the submissions made by both the sides. For purpose of appreciating the arguments, it would be necessary to read the relevant headings. We reproduce the relevant tariff heading as under:
72.15 - Goods and material of heading Nos. 72.03, 72.06, 72.07, 72.08, 72.09, 72.10, 72.11, 72.12 and 72.13 obtained by breaking up of ships, boats and other floating structures.
89.01 - Cruise ships, excursion boats, ferry-boats, cargo ships, barges and similar vessels for the transport of persons or goods.
89.08 - Other floating structures (for example, rafts, tanks, coffer-dams, landing stages, buoys and beacons) As would be observed from the above extracts, Tariff sub-heading 7215.00 clearly identifies goods and materials obtained by breaking up of ships, boats and other floating structures as leviable to duty at the rate of Rs. 1800/- per tonne. The words 'ships and boats and other floating structures' are almost entirely a repetition of the heading given under Chapter 89 which reads as "ships, boats and other floating structures'. Further, Chapter sub-heading 8901.00 includes cruise ships, excursion boats, ferry-boats, cargo ships, barges and similar vessels for transport of persons or goods. Ld. Counsel had submitted that since 'barges' have been separately mentioned side by side with cruise ships, excursion boats etc., this would clearly show the intention of the legislature to treat "ships" and "barges" as two different and distinct items. As regards 'floating structures' Chapter sub-heading 89.07 had given various types of such floating structures. A combined reading of Chapter sub-headings 72.15, 89.01 and 89.07 would thus clearly show that if there was any intention to include barges within the category of ships, boats, and other floating structures, the legislature would have done so having regard to the clear distinction made between the 'ships' and 'barges' in Chapter sub-heading 8901.00.
7. We find that this argument cannot be accepted since Chapter 89 starts with the words "ships, boats and floating structures". Chapter sub-heading 8901.00 is covered by the Chapter heading "ships, boats and floating structures". It cannot, therefore, be argued that barges will not come within the generic description of ships, boats and floating structures covered in Chapter 89. It follows that sub-heading 7215.00 when it talks of "ships, boats and other floating structures" it refers to the generic meaning of "ships, boats and other floating structures" including barges mentioned in 8901.00".
14. Have regard to the ruling of the Apex Court on the issue, we hold that the order of the Delhi Bench of the Tribunal in the case of Ashish Steel Pvt. Ltd. merged with the order of the Apex Court on its affirmation and it became the order of the Supreme Court and hence we hold that ship-breaking is to be considered as manufacturing activity under Central Excise Tariff Act, 85. We agree with the findings of the Tribunal in the case of Ashish Steel Pvt. Ltd. cited above holding that We are of the view that the entries against Chapter sub-heading 7215.00 do not give rise to any scope for doubt as to whether the said activity was an excisable activity or not. When tariff sub-heading 72.15 clearly speaks of breaking up of ships as an excisable event no argument that the said activity is not a manufacture in terms of Section 2(f) of the Act can be accepted".
The four appeals are, therefore, rejected.
(Pronounced)