2002(04)LCX0088

IN THE CEGAT, SOUTH ZONAL BENCH, CHENNAI

S/Shri S.L. Peeran, Member (J) and C.N.B. Nair, Member (T)Third Member on Reference : Shri G.N. Srinivasan, Member (J)

KIER INTERNATIONAL LTD.

Versus

COMMISSIONER OF CENTRAL EXCISE, TRICHY

Final Order No. 494/2002 & Misc. Order No. 361/2001, dated 23-4-2002 in Appeal No. C/639/2000

Cases Quoted

Boskalis Dredging India Pvt. Ltd. v. Commissioner — 1997(11)LCX0007 Eq 2001 (135) ELT 1396 (Tribunal)—Referred               [Paras 17, 18]

Commissioner v. Boskalis Dredging India — 2002 (139) ELT (A313) (S.C.) — Referred [Para 18]

Dredging Corporation of India v. Commissioner — 1999(05)LCX0003 Eq 1999 (112) ELT 0065 (Tribunal) — Referred [Para 4]

Advocated By :   Shri Murugappan, Advocate along with Mrs. Prameela Viswanathan, for the Appellant.

Shri S. Kannan, DR, for the Respondent.

[Order per : C.N.B. Nair, Member (T) (Oral)] - The issue raised in this appeal is whether the two caterpillar wheel loaders imported by the appellants were eligible for exemption under Notification No. 20/99-Cus. (Sl. No. 250). The Customs authorities below have taken the view that these caterpillars are machineries classifiable under Customs Chapter Heading 8429.59 as machinery and mechanical appliances and they are not eligible for the exemption under Notification No. 20/99. The Sl. No. 250 of Notification No. 20/99 reads as under :-

The exemption Notification No. 20/99 is in respect of goods falling under Chapter heading mentioned under Sl. No. 2. In the present case, Chapter heading is 89, which relates to ships, boats and floating structures. The goods under import were as under :-

3.  The appellants’ claim is that the Caterpillars have been imported along with dredger/barges for dredging work to be carried out at Thrukadayur in Tamil Nadu. It is their case that the dredged sand was carried in barges and the caterpillar wheel loaders were used for off-loading the sand at the approved dumping places and, therefore, the caterpillars were part of dredgers which are classifiable under Customs Tariff Chapter Heading 89. The Customs authorities rejected this claim on the ground that the caterpillars are used not only for excavating the sand but also for back filling the sand.

4. When the matter came up for argument before us, ld. Counsel for the appellants submitted that dredgers being classifiable under Customs Tariff Chapter Heading 89, all the equipments used in the dredging operation with the dredger were also eligible to be classified under the said Chapter heading. He specifically submitted that wheel loaders are equipments working along with dredger in the dredging project. He also referred to the HSN Explanatory Note under sub-heading 89.04 (Tugs and Pusher craft) and submitted that the auxiliary equipment fitted with pusher craft are also eligible for classification under Tariff Heading 89. The relevant portion of the Explanatory Notes reads as under :-

“The vessels of this heading are not designed for the transport of persons or goods. They may be fitted with specialised auxiliary equipment for fire-fighting, pumping, cargo heating , etc.”

Ld. Counsel also relied on the Affidavit dated 20-4-2001 of T.D. Corriga, a Project Manager of the appellant wherein he has stated that “the two caterpillars were integral part of the dredging system supplied to the PPN Project. They were also used exclusively for the removal of dredged material from the Dumb (flat top) barges at the designated dumping areas. Without these loaders the dredging system cannot work. The two machines in question were charted as part of a complete system for dredging and brought to India for that purpose only”. He also took us to a certificate dated 1st May, 2001 of the Managing Director of DSB Offshore Ltd. which confirmed that “it is common practice to utilise wheeled loaders in conjunction with a clamshell/backhoe type dredging barge and flat top barges as part of a complete dredging system. They are used to move the arisings from the dredging operation around the flat top barges and assist in the dumping of these arisings in designated dumping areas. The wheeled loaders are therefore considered an integral part of the system without which the dredging system could not function”.

Ld. Counsel for the appellants also relied on the decision of the Tribunal in the case of Dredging Corporation of India v. CC, Visakhapatnam [2000(06)LCX0053 Eq 2001 (135) ELT 0240 (T)=2000 (092) ECR 0264 (Trib.)] in support of the contention that auxiliary items used for dredging are required to be classified as parts of dredgers.

5. As against the aforesaid submissions on behalf of the appellants, ld. SDR has pointed out that the wheel loaders in question are independent and separate machinery from the dredgers/barges etc. and therefore they merit classification under Customs Chapter Hading 84 as machinery. He pointed out that these are basically earth moving machinery and were separate from dredgers. He stated that this is clear from the fact that these wheel loaders had been leased out under a separate lease deed from Amsbach Marine (S) Pvt. Ltd. He pointed out how these are very heavy machineries and each loader weighed 15 tonnes. That they had their own engines is clear from the terms of the agreement which provided that cost of oil, fuel, etc. could be borne by the Lessee. Ld. SDR also submitted that wheel loaders are basically earth moving machines which could be used for all types of civil works including in the handling of dredged material. He further contended that such use in dredging would not bring them within the classification under Heading 89 like ships, barges, etc.

6. A perusal of the records makes it clear that the caterpillar wheel loaders in question are in themselves separate heavy machineries. Each piece weighs 15 tonnes. That they move on their own is clear from the fact that lease deed specifically stipulates that cost of fuel, oil, etc. will be borne by them separately. Customs Tariff Chapter Heading 84 covers a vide variety of machineries and mechanical appliances and their parts. Sub-Heading 84.29 relates to “self-propelled bulldozers, angledozers, graders, levellers, scrapers, mechanical shovels, excavators, shovel loaders, tamping machines and road rollers”. Self-propelled loaders are specifically covered under Customs Tariff Heading 84. It is clear that this machinery is somewhat versatile and can be used in many types of earth work. Disposal of dredged material is only one such use. If they were to be classified according to the use to which each importer puts them, there would be no fixed classification. Duty being dependent on the classification, there will be no certainty about duty rate. Therefore, such a specific use based classification is to be avoided, unless it is specifically provided for in the tax law itself. In the circumstance, we are in agreement with the lower authorities that the correct classification of the item will be under Customs Chapter Heading 84 as determined under the impugned orders.

7 Eligibility to Notification 20/99 is subject to the goods being classifiable under Customs Tariff Chapter Heading 89. It is clear from the Chapter Heading itself that this heading covers only ships, boats and floating structures. Wheeled loaders are not one of these items. Nor do they float. That they are used as auxiliary equipment along with equipments like dredgers and barges etc. would not make them also a floating structure. This position is not changed by the HSN Notes either. The Note under tugs and craft only makes it clear that these vessels “may be fitted with specialised auxiliary equipment”. Wheel loaders are separate machinery, separately leased out and brought on barges. They are also transferred from place to place depending upon the work. Therefore they could not be called auxiliary equipment fitted on vessels.

8. In view of what has been stated above, we are in agreement with the classification of the caterpillar wheel loaders under Customs Tariff Chapter Heading 84 and denial of the exemption under Notification No. 20/99 as done by the Customs authorities. The impugned order is accordingly confirmed. The appeal fails and is rejected.

9. [Contra per : S.L. Peeran, Member (J) (Oral)]. - I had the privilege of reading my brother’s order. I would have no difficulty in accepting my brother’s finding but for the two vital evidences produced by the appellants during the course of the proceedings. Revenue was called upon to submit their comments and they have done so and also have filed parawise comments on the appeal grounds. The evidence is in the form of expert opinion given by the Managing Director of M/s. DSB Offshore Limited , London with regard to the item in question and opining that the item is used to move the arisings from the dredging operation around the flat top barges and assist in the dumping of these arisings in designated dumping areas. It further contends that the wheeled loaders are therefore considered an integral part of the system without which the dredging system could not function. This is supported by the affidavit filed by an expert who is the Project Manager of the appellant’s firm. The contents of the affidavit is reproduced herein below :-

“I Timothy Damian Corrigan, Son of Anthony Corrigan, residing at 12 High St., Sutton, Sandy, Beds, UK, hereby solemnly affirm and sincerely state as follows :-

I am a Project Manager in Kier International Limited and as such I am conversant of the facts and circumstances of the case.

I state that the two caterpillar loaders were an integral part of the dredging system supplied to the PPN project. They were used exclusively for the removal of dredged material from the dump (flat top) barges at the designated dumping areas. Without these loaders the dredging system could not work. The two machines in question were chartered as part of a complete system for dredging and brought to India for the purpose only.

In summary, the machines were an integral part of a dredging system and without them, the dredging and hence the P.P. elating could not have been completed.”

10. Revenue has not adverted to both the evidence and have not filed any counter rebuttal evidence. In that circumstance, in my considered opinion, the matter has to go back to the original authority for testing this evidence and recording their finding in the light of the tariff entry and Explanatory Notes of HSN and the definition of “dredger” as appearing in the Global Encyclopedia Vol-6 at page 268 filed by the appellants in the case. According to the appellants, the definition “Dredging operation” covers operation which is carried out by the impugned goods and the basic activity of dredging is the activity carried out by the item in question. This aspect has not been properly dealt with by both the authorities. On the other hand, the Commissioner (Appeals) has accepted the contention that the item viz. one crane barge Labroy 104 with two used caterpillar 950 wheel loaders is positioned on board. The said crane barge carries out the function of excavation of the sand. However, he has noted that as it is also used for transporting the sand excavated and dumped 10 Kms. away from the dredging operation, therefore in that light, he does not want to consider it as a part of the dredger. In my opinion, the subsequent activity of dumping the sand 10 Kms. away is not relevant for the purpose of considering the item to be an integral part of the dredger. Once it is shown that the item is part and parcel of dredging activity and part of dredging, then the benefit is required to be given. Furthermore, there is no finding as to how the item in question becomes auxiliary equipment and is required to be classified under sub-heading 84.29 which relates to self-propelled bulldozers, angledozers etc. Revenue ought to have shown that the item in question is a self-propelled one and comes within the Heading 84.29. There is no evidence on record or discussion that the item in question is a “self-propelled one” and requires to be classified under this heading. Even if the appellant’s claim is rejected, for the purpose of classification, Revenue is required to show that the item is a “self-propelled” item for classification under 84.29. There is no evidence or catalogue produced before us to show that the item is a self-propelled one for classification under this heading.

11. In my opinion, the matter has to be remanded to the original authority for de novo consideration to reconsider the appellant’s claim in the matter in the light of the citations which has already been taken note of in the impugned order. Thus, I order for remand of the case to the original authority for de novo consideration.

POINTS OF DIFFERENCE

Whether the appeal is required to be rejected as held by the Member ('Technical) in his order .

(OR)

Whether the appeal is required to be remanded to the original authority as held by Member (Judicial).

Registry is directed to place the matter before the Third Member for determination of points of difference as recorded supra.

12. [Order per : G.N. Srinivasan, Member (J)]. - This reference 3rd Member has arisen under the following circumstances.

13. The appellants are one of the sub-contractors engaged by M/s. Marubeni Corporation of Japan for installation of Single Point Mooring System (SPM) and associated pipelines for M/s. PPN Power Generating Company at the port of Thirukkadaiyur. The appellant states that for carrying out the above work they brought into India dedging equipment consisting of the following during April, 1999.

(a)     Dumb barges namely Como 10 and Ocean Corn-1213

(b)     Crane barge-Labroy-104 with crane and two caterpillar loaders and associated equipment.

(c)      Tug-Ocean Juliet.

14. The appellant filed a Bill of Entry, which reads as under :

Barge (Labroy - 104) (Floating crane); Barges (Como - 10) Ocean Com (1213); Ocean Juliet (Tug); Fuel on Board Ocean Juliet.

15. He has claimed classification in respect of 14 cranes under 8905.90. The appellant also claimed exemption under Notification No. 20/99 in respect of Sl. No. 250 thereof. The Assistant Commissioner agreed with the submissions made by the assessee and later on a less charge was raised by the Department by issuance of show cause notice dated 2-8-99. In respect of this show cause notice, the Assistant Commissioner of Customs, Customs Division, Nagapattinam by Order-in-Original No. 6/99, dated 12-10-99 did not agree with the contention raised by the appellant that they are entitled to exemption under Notification No. 20/99 under Sl. No. 250. Against this order an appeal was filed and the Commissioner (Appeals) by his Order No. 6/2000 (Cus.) (GVN), dated 31-7-2000 did not agree with the contention raised by the appellant but confirmed the order of the adjudicating authority. An appeal was filed before this Tribunal and Tribunal by its Order No. 361/2001 passed separately by Members. Member (T) did not agree with the contentions raised by the appellant but held that the classification of the caterpillar wheel loaders under Customs Chapter Heading 8429.59 and denied exemption under Notification No. 20/99 as done by the Customs authorities were confirmed. Member (J) did not agree with the views of Member (T) but held that the matter has to be remanded to reconsider the appellant’s, claim in the matter in the light of citations which has been already taken note in the impugned order. Under these circumstances, the matter is placed before me to resolve the difference of opinion.

16. I have heard elaborately the argument made by ld. Counsel Shri Murugappan along with Mrs. Prameela Viswanathan on behalf of appellant and ld. DR Shri A. Jayachandran on behalf of the respondent.

17. The thrust of the case need not be mentioned as it is reflected in Members orders. I have again considered the judgement of the Tribunal reported in 1997(11)LCX0007 Eq 2001 (135) ELT 1396. I have also seen the Section Note XVII, page 1532 where it says “Parts and accessories covered more specifically elsewhere in the Nomenclature are to be excluded”. When the assessee has claimed the exemption under Notification No. 20/99 under Sl. No. 250 thereof, one has to consider whether it will form part of each of the chapters as indicated in the said Sl. No. The assessee has claimed it as a part of the barge and argued before me by ld. Counsel for the appellant that floating crane is part of the barge system. But when we look into HSN note tariff reflected in above which is identical with that on our own tariff. One will find that for each and every item there is a comma inserted. If we look into the aspect of the matter from this angle namely the ‘comma’ it has to be given effect to. If it is a system of dredger included within its ambit floating crane as well HSN will not provide for dredgers followed by comma and floating cranes. Our tariff, which is based on HSN, clearly follows that and without giving the meaning to comma, I will be failing in duty if I accept the argument made by ld. Counsel. From this angle and also for the reasons stated by Member (T), I agree with the views recorded by Member (T).

18. During the course of the argument ld. Counsel referred to me the judgment of the Tribunal in Boskalis Dredging India Pvt. Ltd. v. Commissioner as reported in 1997(11)LCX0007 Eq 2001 (135) ELT 1396 confirmed by the Hon’ble Supreme Court in its order dated 19-2-1999 dismissed the Civil Appeal Nos. 4951 of 1998 [1999(07)LCX0076 Eq 2002 (139) ELT A313 (S.C.)]. But in my view the reference to the said judgment is unnecessary for the facts of the case as it is different from valuation as stated by me earlier. For the reasons recorded by Member (T) I do not agree with the views recorded by Member (J). I agree with the views recorded by Member (T). The Registry is directed to place the papers before the regular Bench for disposal of the appeal.

MAJORITY ORDER

In terms of majority order, the impugned order is confirmed and appeal is rejected.

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Equivalent 2002 (144) ELT 0657 (Tri. - Chennai)

Equivalent 2002 (052) RLT 0966