The AO observed that, assessee failed to collect tax at source on certain items at time of sale of scrap arising on dismantling of ships and hence he passed an order u/s.206C(1) directing assessee to collect tax at source along with interest.  

Tribunal held that, tax was not required to be collected at source on those items which could be used as such without modification.  Items sold which were capable of being used as such without any modification would fall outside purview of Explanation (b) to S. 206C. (AY 2008-09)