1986(11)LCX0011

BEFORE THE CEGAT, SPECIAL BENCH ‘B’, NEW DELHI

S/Shri Harish Chander, Member (J) and I.J. Rao, Member (T)

MINERAL EXPLORATION CORPORATION LTD.

Versus

COLLECTOR OF CUSTOMS

Order No. 1239 & 1240/86-B2, dated 4-11-1986 in Appeal No. C/2555/85-B2 and C/1981/85-B2

Advocated By : S/Shri S.V.A. Bobde, Senior Advocate and S.D. Mudlier, Advocate, for the Appellants.

Shri J. Gopinath, SDR, for the Respondents.

[Order per : I.J. Rao, Member (T)]. - Both these appeals emanated from the same Order of the Collector of Customs (Appeals) Bombay. The facts in both cases are common. We, therefore, heard them together and proceed to dispose of them together by a common order.

2. The appellants imported Longyear Model Hydro 44 drilling machine with accessories and spare parts. This was assessed to customs duty under heading 87.03 of CTA and to additional duty on the basis that the imported drilling machine fitted in a truck was liable to additional duty under Item 68 and the truck part of it under Item 34 of the CET in view of the Explanation II of Item 34 of CET. The appellants cleared the goods after payment of customs duty claimed to be under protest and subsequently made an application for refund of part of the duty claiming re-assessment of the goods under heading 84.23 on the ground that the imported machine was Hydro 44 Drill with accessories and spares. The Assistant Collector noted that the machine imported was mounted on the International Harvester 4 x 6 tandem axle truck. According to him the machine imported was a truck-mounted drilling unit and was excluded from Heading 84.23 CTA in view of the Explanatory Notes to CCCN on the ground that the chassis in question had the essential features, such as clutch, gear box, transmission system, steering, suspension, wheels and tyres, which are akin to any motor vehicle. The Assistant Collector ordered that the assessment under Heading 87.03 CTA was correct. He also took into consideration the Explanatory Notes, appearing on page 1495 Section XVII where, according to him, there was a clear inclusion of mobile derricks i.e., lorries fitted with the derrick assembly whinches and other appliances for drilling. He, therefore, rejected the refund application and confirmed the assessment of the drills under Heading 87.03 CTA as a special purpose vehicle. However, for the purpose of additional duty, he ordered that the goods be charged on the drilling unit and the truck portion separately in view of the Explanation II to Item 34 CET.

3. Aggrieved, the appellants filed appeal before the Collector of Customs (Appeals). The Collector framed two issues, namely,

(i) whether the imported drilling machine was self-propelled machine?

(ii) whether it is a vehicle of the type described under Heading 87.03 of CTA and CCCN.

4. After discussion, the Controller (Appeals) held that since the imported drilling machine was not a self-propelled drilling machine, it was very much within the ambit of Heading 84.23 of the CTA and was to be appropriately classifiable under that heading. In so far as the additional duty was concerned, he confirmed the order of the Assistant Collector.

5. It is against this order that the present two appeals are filed. The importers, namely, M/s. Mineral Exploration Corporation Limited, submit that the CV duty on the entire machine should be charged under T.I. 68 CET. The Department’s appeal is against the order of the Appellate Collector and seeks to restore the classification of the imported machine under Heading 87.03 CTA.

6. We shall take up the question of basic customs duty first. The competing entries before us are Heading 84.23 CTA under which the Appellate Collector ordered classification and 87.03 under which the Assistant Collector originally ordered classification. For a proper appreciation of the question, we reproduce these two headings:

“84.23 - Excavating, levelling, tamping, boring and extracting machinery, stationary or mobile, for earth, minerals or ores (for example, mechanical shovels, coal-cutters, excavators, scrapers, levellers and bull dozers) pile-drivers, snow-ploughs, not self-propelled (including snow plough attachments).”

“87.03 - Special purpose motor lorries and vans (such as breakdown lorries, fire engines, fire-escapes, road sweeper lorries, snow-ploughs, spraying lorries, crane lorries, search-light lorries, mobile workshops and mobile radiological units), but not including the motor vehicles of Heading No. 87.02.”

7. The learned SDR, supporting the classification under Heading 87.03, submitted that the Collector (Appeals) while interpreting the meaning of Heading 84^3 extended scope of the word “not self-propelled” to apply also to all types of machines listed therein, but, in fact, they are to apply to snow-plough. He further submitted that a careful reading of Heading 84.23 should show that it has been sub-divided info three categories of machines. The first category deals with excavating, levelling, tamping, boring and extracting machinery, stationary or mobile, for earth, minerals or ores (for example, mechanical shovels, coal cutters, excavators, scrapers, levellers and bull dozers). The second category covers pile-drivers; snow-plough, not self-propelled (including snow-plough attachments). Therefore, according to the learned SDR, the Appellate Collector misdirected himself and was wrong in holding the word self-propelled applied to the drilling machine also.

8. It is further submitted by Shri J. Gopinath that according to CCCN, the Heading 84.23 covers five categories of machines which had been summarised into three categories in CTA Heading 84.23.

9. Shri Gopinath further submitted that admittedly the imported drilling machines were fitted on a truck and that the Collector’s observation to the effect the. Asstt. Collr. had decided that what was imported was a special type of transport equipment falling under Heading 87.03 of the CTA, was not entirely correct. He submitted that finding of the Asstt. Collr. as recorded in the last paragraph of his order was that the drilling machine is mounted on a self-contained automobile type of vehicle, and therefore, was classifiable as a whole under Heading 87.03 as “special purpose vehicle”. He emphasised that special purpose vehicles are entirely different from the transport vehicles and gave an illustration with reference to Heading 87.03 to show that only special type of vehicles perform non-transport functions, fall under Heading 87.03. In this context, he referred to the opening words of Heading 87.03 which go to say “This heading covers a range of motor vehicles specially constructed or adapted, equipped with various devices that enable them to perform certain special non-transport function, i.e., the primary purpose of the vehicle of the present heading, is not the transport of goods or persons”.

10. Shri Gopinath argued that the Heading 84.23 covers excavating, levelling and boring machinery. He submitted that the drilling machine which is only skid mounted and not mobile, will fall under Heading 84.23, but the fact remains that in the present case, the drills imported are mounted on International Harvester 4 x 6 tandem axle truck which has an automobile chassis. He, therefore, submitted that the imported goods fall under Heading 87.03 and not 84.23 as claimed by the Mineral Exploration Corporation.

11. Shri Bobde, the learned Counsel for the appellants, opposing the arguments, submitted that the imported goods are squarely covered by Heading 84.23. What was imported was a mobile excavating rig which falls into the category of boring and extracting machine. Recalling that a skid-mounted rig was classified by the Custom under Heading 84.23. Shri Bobde submitted that mounting is optional and the drill could be mounted either on a truck or a skid or a tractor. The mounting would be done according to the needs, but it does not impede the purpose or use of the drill.

12. Shri Bobde further pointed out that the value of the drill was Rs. 33 lakhs whereas the value of the truck was Rs. 9.72 lakhs and total value of the imported machinery being Rs. 42.72 lakhs. These figures were given by him to show that the primary value was of the drill and not of the truck.

13. Referring to the wording of Heading 87.03, Shri Bobde submitted that this heading covered only special purpose vehicles, which were designed for a specific purpose. In this case what was imported was not a vehicle but was a drill which was mounted on a vehicle for the purpose of mobility. Shri Bobde, therefore, submitted that the imported goods could be considered only as drills and not as vehicles not only because the purpose of imported goods was excavating, boring and extracting but also because the mounting was incidental and conferred only mobility to the equipment to maximize its use. The imported goods, according to Shri Bobde, could not, by any stretch of imagination, be called vehicles. Shri Bobde, however, agreed that as submitted by the learned SDR, self-propulsion was irrelevant and that the Collector might have gone wrong in considering that self-propulsion of the drill was a criteria. However, according to the learned Counsel, this would not take away any of the appropriateness of classifying the drill under Heading 84.23.

14. We would like to decide the question of classification for the purpose of basic customs duty before proceeding to the question of CV duty.

15. About the function of the imported drill, there is no doubt. It is used for drilling. It is also clear that the drill can be imported mounted on a skid as was stated to have been done earlier by the appellants (when they got the goods classified under H 84.23) or mounted on a truck. In this case, the drill has been imported mounted on a truck. It is equally clear that the drill did not become an integral part of the truck though it is mounted on the same and mobility is provided by this arrangement. The learned SDR explained that while the truck has all normal features attributed to motor vehicle, none of the controls for the operation of the drill find place within truck. This position is also accepted. We have also taken into consideration that the value of the truck is around 28% of the total value of the entire drill together with the truck.

16. Keeping this in view, we carefully perused heading 87.03 CTA. This heading covers special purpose motor lorries and vans. The examination of the imported goods and the purposes for which they are manufactured shows that the imported goods lost their identity as motor vehicles. The basic character is that of a drill and not of a vehicle. At the same time, we examined Heading 84.23 also. This heading seems to be most akin to the goods in question because it covers excavating, levelling, tamping, boring and extracting machinery. This description fits the imported goods much better than the description given under Heading 87.03. In our opinion, the imported goods cannot be looked upon as vehicle fitted with special equipment; they can be, more reasonably, considered as drilling equipment mounted on a vehicle. Once this view is taken, reference to the CCCN and Explanatory Notes therein, becomes irrelevant. Therefore, while we hold that the Collector of Customs (Appeals) wrongly considered the question of self-propulsion, the conclusion, he reached, about the classification of the goods for the purposes of basic custom duty, was correct. In this view, we uphold the impugned order of the Collector of Customs (Appeals) is so far as it relates to classification for the purposes of custom duty.

17. That brings us to the question of additional duty. The appellants’ plea is that the entire goods imported should be considered as drilling machinery only and should be subjected to duty only under T.I. 68 CET. There is validity in their submission that Explanation II to the Item 34 is not applicable inasmuch as the imported goods are not mounted/fitted with any weight-lifting or other specialised material handling equipment, but were equipped with only drilling equipment. However, this reason alone does not help the importers. We note that the goods imported can be clearly separated for the purposes of valuation and identification as a truck and drilling equipment. It is not as if the entire unit is so integrated that it becomes inseparable for any of these purposes. Therefore, in our view, the countervailing duty was correctly levied under Item 68 for the drilling equipment and under T.I. 34 for the vehicle part of the equipment.

18. In this view uphold the impugned order of the Collector of Customs (Appeals) whereby the confirmed the Assistant Collector’s orders regarding the levy of additional duty.

As a result, both the appeals are dismissed.

Equivalent 1990 (046) ELT 0049 (Tribunal)