Judgment

B. P. JEEVAN REDDY J. -Leave granted in SLP (C) No. 2074/ 93.

2. Civil Appeal No. 1104 of 1990, preferred by the Union of India, arises from the judgment of a Division Bench of the Bombay High Court reported in 1987 (32) E. L. T. 697 allowing the writ petition filed by M/s. Jalyan Udyog and M/s. West Asia Shipping Company Private Limited, the respondents in this appeal. Rest of the appeals arise from a common judgment of another Division Bench of the Bombay High Court dismissing the writ petitions filed by the ship-owners. The later Division Bench distinguished the decision in Jalyan Udyog and held in favour of the Union of India. The ship-owners have accordingly filed these civil appeals. The matters arise under the Customs Act, 1962.

3. In the year 1958, the Central Government issued a notification (exemption notification) being notification No. 262-Cus. dated October 11, 1958 in exercise of the power vested in it by Section 25 of the Act. The notification read thus :

"Exemption to ocean going vessels other than vessels imported to be broken up:

Ocean going vessels other than vessels imported to be broken up, are exempt from the payment of Customs duty leviable thereon.

Provided that any such vessel subsequently broken up shall be chargeable with the duty which would be payable on her if she were imported to be broken up"

4. By a notification dated October 16, 1965 (Notification No. 162-Cus.) the Central Government substituted the proviso in the abovesaid notification. The substituted proviso reads thus :

"Provided that the duty of Customs shall be levied on the vessel if it is broken up as if it were then imported to be broken up."

5. So far as the factual aspect is concerned, it would be sufficient if we refer to the facts in Jalyan Udyog* :

* The facts in the other appeals are substantialy the same; only the dates differ.

On April 24, 1968 the Chairman of the Shipping Corporation of India wrote to the Government of India seeking its permission to purchase two second-hand ships for operating between India and the Gulf and other destinations as ocean-going vessels (passenger ships). On June 1, 1968 the Government of India accorded the permission. Accordingly, two second-hand oceangoing vessels were purchased which arrived at the Bombay Port on August 14, 1968. No import duty was levied on the import of these ships in view of the aforesaid exemption notification. They were registered in India in the same year as M. V. Vijay Jiwan and M. V. Vijay Vaibhav and were operated as ocean-going vessels till 1980, in which year they were sold to Vijaya Lines Private Limited. Vijaya Lines operated them for sometimes as ocean-going vessels and then sold them in the year 1982 to the second respondent herein viz, West Asia Shipping Company Private Limited, a company incorporated in India. The last voyage undertaken by these ships was in February, 1982. In April-May, 1983 both these ships were laid-up in the Bombay harbour inasmuch as they had become obsolete and unfit to ply (not sea-worthy). In August, 1983, the second respondent decided to scrap these ships but since the permission of the Director General of Shipping was required for scrapping, it sought such permission from the Director General of Shipping. On October 1, 1983 permission for scrapping was accorded. On September 12, 1984 the second respondent sold the said ships to the first respondent, M/s. Jalyan Udyog, a partnership firm registered under the Indian Partnership Act.

6. On March 1, 1984 the Collector of Customs, Bombay issued a public notice prescribing the procedure for assessment of the value of Indian Flag Vessels meant for scrapping and other allied matters. The procedure prescribed in the public notice, in short, was to this effect: the valuation of Indian Flag Vessels cleared for breaking/ scrapping will be on the basis of current import prices of similar vessels imported by M.S.T.C. (Metal Scrap Trading Corporation Limited), Calcutta for scrapping during the period