UNION OF INDIA AND ORS. versus ALANG SHIP BREAKERS PVT. LTD., BHA VNAGAR AND ORS.

Citation: [1993] SUPP. 2 S.C.R. 48 · Decided: 27-08-1993 · Supreme Court of India · Bench: KULDIP SINGH · Disposal: Appeal(s) allowed

Judgment (excerpt)

A 
UNION OF INDIA AND ORS. 
v. 
ALANG SHIP BREAKERS PVT. LTD., BHA VNAGAR AND ORS. 
AUGUST .27, 1993 
B 
[KULDIP SINGH AND S.C. AGRAWAL, JJ.] 
Central Excises and Salt Act, 1944-Central Excise Rules, 1944-Rule 
~Whether withdrawal of show cause notice and confonned demand notices, 
relating to payment of excise duty, in pursuant to consent tenns of agreement 
C between the parties, for waiver of a"ears of excise duty, after payment of 25% 
of the duty in compliance with interim order of High Court, entitled the payer 
to obtain refund of the portion of duty paid-Whether communication about 
waiver of excise duty, related to waiver of the unpaid balance duty only. 
D 
The respondents, are engaged in business of breaking/dismantling 
of old unserviceable ships. After breaking/dismantling the old vessels, they 
sell the metal scrap in open market. In 1985, the Central Excise authorities 
concerned, required the respondents to pay excise duty on the said 
material taking the view that dismantling or breaking the unserviceable 
ships constitute 'manufacture'. Notices were issued to show cause as to 
E why excise duty under Tariff item, 25 (d) of Central Excise Tariff be not 
levied and collected. Respondents filed writ petition in Gujarat High Court 
for injuction restraining the Excise authorities from levying or collecting 
duty on such scrap or interfering with clearance or removal of scrap, 
contending that excise duty was not leviable on the scrap. The High Court 
F 
passed interim order that respondents shall be entitled to clear the goods 
on payment of 25% of excise duty payable and shall execute personal bonds 
for payment of the balance 75% duty, if writ petition is dismissed. The 
question regarding refund of 25% duty paid was to abide by final direction 
of the Court. Thereafter, the parties arrived at agreement and filed consent 
G terms in the High Court to the effect that the excise authorities shall not 
enforce personal bonds, the Government will consider appropriate reduc-
tion in excise duty after withdrawal of writ petition and the Respondents 
shall abide by government decision and that the Government would also 
evolve suitable scheme to ensure waiver of arrears of excise duty. The High 
Court made final order in terms of the parties consent terms and disposed 
H of writ petition, without any directions about 25% of duty paid by Respon-
48 
•
U.0.1. v. ALANG SHIP BREAKERS PVT.LTD. 
49 
dents, Interim relief was vacated. Thereafter, Government of India issued A 
notification dated August 2, 1986, under Rule 8(1) of Central Excise 1944, 
exempting ship scraps from excise duty. Under Secretary to Government 
of India, Department of Revenue sent a letter dated April 6,1989, to 
Collectors concerned that it has been decided to waive duty on ship scraps 
for the period prior to notification dated August 2, 1986 and accordingly B 
show cause notices and confirmed demand notices may be withdrawn. · 
Respondents on rejection of their applications for refund of 25% of duty 
paid, filed writ petition in the High Court for directions to the Appellants 
to refund the amount with interest. The writ petition was allowed by the 
High Court. Union of India filed appeal against the order of the High 
Court. This Court allowed the appeal on consideration of contents of the C 
consent terms of the parties, the fact that the High Court had not made 
any order relating to refund of the portion of duty paid, while disposing 
of the writ petition and that the notification dated August 2, 1986, was 
prospective, and not operative retrospectively, and 
HELD : The letter dated April 6, 1989, is confined in scope to consent 
terms, which is limited to ''waiver of the arrears of excise duty". It cannot 
D 
be construed as referring to payment of 25% of the duty paid. Waiver of 
arrears of excise duty can only mean waiver of something which has not 
been paid. The direction to withdraw the show causes notices and con-
firmed demand notices, only means that no further action be taken for E 
recovery of arrears namely 75% of excise duty and cannot be construed to 
mean, refund of 25% of duty paid under High Court order. [55-B-E] 
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 4301-
4346 of 1993. 
From the Judgment and Order dated 4.12.90 of the Gujarat High 
Court in C.A. Nos. 5599/89, 5855/89, 5856/89, 300/90, 301/90, 302/90, 525/90 
to 529/90, 531/90 to 543/90, 546/90 to 562/90, 641/90, 854/90, 2927/90, 
2928/90, 2929/90. 
D.N. 

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