I am doing audit of a shipyard situated in goa. they also manufacture the propellors of ships. For this they have a seperate machining shop. All the required material is purchased in india. During the manufacture of these propellors 'powder like iron'emerges as a result of manufacture along with the main product. This along with waste steel sheet(used for ship construction) is sold as scrap.
I want to know whether the sale of such scrap attracts Excise duty
In view of amendment made by the finance act,2008 in the definition of excisable goods(w.e.f. 10 may 2008) under
section 2(d) of the central excise act,1944, which include baggase,aluminium/zinc dross and other such profucts termed as waste, residue,which arise during normal course of manufacturing and are capable of being sold for consideration would be excisable goods and chargeable to payment of excise duty.
06 July 2013
F.No.267/92/94-8(Pt.) Government of India Ministry of Finance (Department of Revenue)Central Board of Excise and Customs, New Delhi Subject : Deemed Credit to ship-breakers, denial of-instructions regarding
It has been brought to the notice of the Board that scrap generated by breaking of a ship etc. is not being allowed deemed modvat credit by certain field informations. The ship-breakers have also represented to the Board. The matter has been examined and the following instructions are issued :
RUle 57G of the Central Excise Rules 1944, stipulates that the Government has the power to allow deemed credit having regard to the period that has elapsed since the duty of excise was imposed on any inputs, the position of deemed and supply of the said inputs in the country and any other relevant considerations. If no duty is imposed on any of the inputs then the provisions of Rule 57-G can not be invoked to allow deemed credit. Since the scrap cleared by the ship-breakers have not suffered the duty, it would not be correct to allow deemed credit on such scrap.
Sd/- (I.P.Lal) Deputy Secretary to the Government of India
Ship breaking (also called ship demolition) is the process of dismantling ships for scrap metal and recycling or disposal. Today the ship breaking process takes place in a facility called ship breaking yard, while in the past scrapping ships took place in major port cities worldwide, and mostly in those of highly industrialized countries (UK, USA, Germany, Italy). Ship dismantling includes numerous manual procedures and entirely excludes automation solutions, resulting in substantially higher labor costs. This is the primary reason today the largest ship braking yards to be located and operated in India, Pakistan, Bangladesh and China – countries with extremely low labor cost and almost no environmental laws.
Ship breaking is only one of several main ship disposal alternatives, also including hulking, floating or dry-dock storage, donation or sale for reuse, deep-water sinking and making artificial reefs (for detailed info check Ship Recycling). Having an average lifespan of a 20-40 years (depending on ship type), most ships become obsolete when the repair and refitting becomes uneconomical for the owner. Generally, ships ready for scrapping are put up for sale by their owners and usually the highest bidder wins the contract. Most of these already doomed vessels can make it to the scrapping yard under their own power, thus avoiding the not cheap charge for towing.
There are four major economic benefits of breaking ships for scrap and recycling that have made the breaking of ships a powerful industry:
Steel production – the ships scrapping is the country’s main source of steel, it reduces the need to import steel materials, thus saving huge amount of money. A “green industry” – the ship breaking scrap signifies reusing and recycling of almost everything on the vessel and the vessel itself, providing raw materials to the steel industry, asbestos for re-manufacturing factories, even furniture, electrical and electronic equipment, lubricants, oil, etc. The ship recycling industry generates large Government tax revenues mainly through import duties and the yards tax. it provides employment for some of the poorest people of the world, who would otherwise have no employment at all. But all these economic benefits should be considered together with the social and environmental costs. People live and work in the most primitive conditions, high levels of pollution (most ships are used to carry such hazardous materials, like radioactive and toxic wastes, poisonous chemicals and oil), a severe contamination of the sea bed and the entire marine food chain.
Shipbreaking is one of the most hazardous jobs and among the world’s most dangerous professions according to the International Labour Organization. In Bangladesh, India and Pakistan there’s an average of 1 serious accident per day and 1 death per week on the ship breaking yards, the main causes being falls, fire and explosions, suffocation, falling objects, and many workers contract cancers caused by asbestos and numerous other toxic substances. Still are not respected by the industry all orders to the yards to produce environmental certificates, pre-cleaning reports and to ban the import of ships for scrap that had not been decontaminated in the export country.
Ship Breaking industry
Since the 80′s, the ship breaking industry almost entirely changed its main operational regions from strong economy highly industrialized countries, like Britain, USA and Germany, to some of the most impoverished regions in Asia. The relocation process started in the late 50′s, and while in the not so distant past ships for scrap were processed in major port cities of countries worldwide, today main factors in making business decisions in the ships breaking industry are the cheap labor, the lax of regulations and little environmental constraints in all developing countries in the Far East.
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