K.L. Rekhi, Member (J)

1. The dispute in this appeal is on the assessable value of a ship, purchased by the appellants in a public auction, for breaking up.

2. The ship, M.V. 'NIONIO', built in 1969 and having Light displacement tonnage (LDT) of 6,245 tons, came to India on 28.3.1985 with cargo of 23,995.782 M.T. of D.A.P. in bulk. The ship defaulted in payment of Admiralty charges It was arrested by the Sheriff of Bombay around 30.4.1985. The crew and Master of the ship signed off on 7.7.1985 and abandoned the ship. The ship remained laid up near Navlakhi Port in Gujarat. In course of time, the ship got partially submerged in water. In pursuance of the Hon'ble Bombay High Court's order dated 30.7.1985 and decree dated 20.9.1985 in Admiralty Suit No. 9 of 1985, the Sheriff of Bombay sold the ship by a public auction on 6.12.1985 on 'as is where is' basis. The Sheriff had fixed Rs. 50 lakhs as the minimum reserve price for the auction. The appellants offered the highest bid of Rs. 50 lakhs. Their offer was accepted. It was approved by the Hon'ble Bombay High Court on 27.12.1985. In the meantime, with permission of the Sheriff, the appellants put their own guards on the ship on 20.12.1985. The ship was salvaged and beached on 24.1.1986. The appellants filed the Bill of Entry on 5.2.1986 for Customs clearance of the ship. The Superintendent of Customs provisionally assessed the ship on 26.3.1986 by taking the auction value of Rs. 50 lakhs as per the interim order dated 19.3.1986 passed by the Hon'ble Gujarat High Court. The High Court vacated the interim order on 1.5.1986 and directed the Customs authorities to assess the value of the ship as per the custom law. The appellants contended before the Superintendent that the ship had been plundered and damaged and that, therefore, the value of Rs. 20.20 lakhs assessed by the appellants' surveyors M/s. Metcalfe Hudgkin-son (Pvt.) Ltd., on the basis of the condition of the ship, should be accepted as the value for assessment of Customs duty. The Superintendent consulted M/s. Metal Scrap Trade Corporation Ltd., the official canalising agency set up by the Government of India for import of ships for breaking up. The M.S.T.C, without inspecting the ship and on the basis of LDT of the ship, advised that similar ships, i.e., having similar size and weight, were valued at $ 6.05,765 (@ $ 97 per ton) equivalent to Rs. 73,69,403.90. On adjudication, the Superintendent, by his order dated 31.5.1986, approved the assessable value on the basis of M.S.T.C.'s value of similar ships plus the usual landing charges at 2.30%.

3. Aggrieved, the appellants filed an appeal before the Collector (Appeals). The Collector (Appeals) held that M.S.T.C.'s value conformed to the deemed price in Section 14(1) (a) of the Customs Act, 1962 at which such or like goods were ordinarily sold, or offered for sale, in the course of international trade. However, considering that much of the moveable stores and gears and some engine parts of the ship had been pilfered during the time it remained laid up, the Collector (Appeals) gave 20% reduction in the M.S.T.C.'s valuation. He gave a further reduction of Rs. 2 lakhs towards salvage expenses for the ship. The value so determined by the Collector (Appeals) worked out to Rs. 54,48,520.25, which was only marginally higher than the auction price of Rs. 50 lakhs.

4. Still aggrieved, the appellants filed the present appeal before this Tribunal. The appellants pleaded that no Customs duty at all was payable on the ship. In the alternative, they desired assessment on their surveyors' value of Rs. 20.20 lakhs. During the hearing before us, the appellants pressed for 3 arguments in support of their first proposition and one argument in support of the second proposition. In the succeeding paragraphs, we shall deal with each of the arguments pressed for by them.

5. The appellants contended that since the ship was sold to them by the Sheriff of Bombay, it was Government property befor