1999(02)LCX0272

IN THE CEGAT, EASTERN BENCH, CALCUTTA

Shri P.C. Jain, Vice President and Smt. Archana Wadhwa, Member (J)

MENOR FLOATEL LTD.

Versus

COMMISSIONER OF CUSTOMS, CALCUTTA

Order No. A/130/Cal/99, dated 24-2-1999 in Appeal No. C/R-18/98

Cases Quoted

Kumudam Publication (P) Ltd. v. Commissioner — 1995(12)LCX0085 Eq 1997 (096) ELT 0226 (S.C.)

— Distinguished                                                                                                                                [Paras 5, 10, 13]

U.O.I. v. V.M. Salgaonkar — 1998(03)LCX0068 Eq 1998 (099) ELT 0003 (S.C.) — Referred                                                      [Para 10]

Collector v. S.S. Enterprises — 1994(08)LCX0098 Eq 1994 (074) ELT 0794 (S.C.) — Referred                                              [Para 10]

Oswal Agro Mills v. Collector — 1993(04)LCX0046 Eq 1993 (066) ELT 0037 (S.C.) — Referred                                           [Para 10]

Collector v. Lotus Inks — 1996(09)LCX0068 Eq 1996 (087) ELT 0580 (S.C.) — Referred                                                       [Para 10]

S.T.P. Ltd. v. Collector — 1997(12)LCX0049 Eq 1998 (097) ELT 0016 (S.C.) — Referred                                                          [Para 10]

E.I.D. Parry (I) Ltd. v. Commissioner — 1997(12)LCX0128 Eq 1998 (100) ELT 0275 (Tribunal) — Referred                 [Para 10]

Advocated By : S/Shri Bhaskar Sen, Sr. Advocate with P.K. Das, Advocate, for the Appellant.

Shri R.N. Das, Advocate, for the Respondents.

[Order per : P.C. Jain, Vice President]. - Briefly stated the facts of this case are as follows :

2. The appellant herein imported goods declared as “Completely assembled Hull” and filed a Bill of Entry on 11-7-1997 for clearance of the same. Assessment of the goods was sought under Tariff Heading 89.06 of the CTA 1975 as “Hull”; alternatively under Tariff Heading 89.05. The authorities below, however, have treated the aforesaid goods as “other floating structures” not having the character of vessel as under Tariff Heading 89.07. The original authority classified under Tariff Heading 89.07 relying on general Explanatory Notes under Tariff Heading 89.07 inasmuch as the said goods were meant for use as floating hotel.

3. Lower appellate authority has held that the expression Hull has not been specifically defined either in the Customs Act or in the CTA 1975. However as per definition in the various dictionaries ‘hull’ can be said to be the body/shell/frame (excluding the masts, rigging etc.) of a ship/vessel. Ship/vessel, as per definition in various dictionaries, is a craft used as a means of transportation of goods or people on water. Black’s Law Dictionary defines ‘vessel’ as a ship... or other craft used or capable of being used in navigation on water ... Many special purposes craft, such as dredgers, floating derricks ...etc. equipped for special purposes of operations are vessels .... on the other hand, however, everything that foats is not necessarily a vessel. The said authority, therefore holds that “Hull”in view of the above is a frame/shell/body of a craft intended for use in transport/navigation on water. He, further holds that to be a hull, the goods must have the prerequisite shape/size not only to keep the body afloat, but also to allow appreciable navigability to the body.

4. He further finds that nothing has been brought forth in the appeal to suggest navigability of the imported goods. From the photograph of the imported goods also he find that the same is a 3 tier structure constructed on the top of a floating body and does not have the required shape/size and/or characteristics to make the same navigable. Certificate produced by the Builder of the imported goods, the supplier’s invoice and description in the Bill of Lading describing the goods as ‘hull’ have been discarded by the lower appellate authority on the ground that they did not indicate that the imported goods are navigable. Consequently, he has ruled out classification under Heading Numbers 89.01 to 89.06.

5. He further finds, relying on Apex Court judgment in the case of Collector of Customs v. Kumudam Publication (P) Ltd. - 1995(12)LCX0085 Eq 1997 (096) ELT 0226 (S.C.) that end-use or function of any goods is not entirely irrelevant on the question of classification. Since the goods are going to be used as a floating hotel, he treats the goods as ‘other foating structures’ which fall under Tariff Heading 89.07.

6. It is against the aforesaid order that the appellants herein have filed this appeal.

7. Ld. Sr. Advocate, Shri Bhaskar Sen for the appellants has urged that there is a total non-application of mind by the lower appellate authority when it holds that the imported goods are not navigable. In this connection he submits that the goods would not have been given Port Clearance Certificate by the Port Authorities of Singapore, had the imported goods described as “Gold Float” under the heading “name of the vessel” not been navigable? He further draws attention to the certificates styled as International Load Line Certificate (1966) issued by Bureau Veritas, Branch Office, Singapore which certifies that this Ship has been surveyed and the freeboard had been assigned and load lines shown above have been marked in accordance with the International Convention on Load Lines (1966). Ld. Advocate emphasis the expression “Ship” in this certificate. He further draws attention to a Certificate dated 21st March, 1995 issued by Chartered Engineers/Surveyors wherein while giving a certificate the above goods namely ‘Gold Float’ has been described as “above named Vessel”.

8. Drawing attention to the Explanatory Notes under Chapter 89, he submits that the General Explanatory Notes under the heading “General” indicates that “this Chapter covers Ships, Boats and other vessels of all kind (whether or not self propelled) and also foating structure such as coffer dams, landing stages and buoys. It also includes air cushion vehicles (hovercraft) designed to travel over water (sea, estuaries, lakes), whether or not able to land on beaches or landing stages or also able to travel over ice.” The General Notes also indicates that this Chapter covers `hulls’ of any material. Drawing further attention to the notes under Tariff Heading 89.07, he points out that this heading “covers certain floating structures” not having the character of the vessels. They are generally stationary while in use and include..." (emphasis supplied by the ld. Advocate). He submits that the goods as have been imported have come over the oceans and seas under tow of another Ship. Therefore, apart from the various certificates, its navigability cannot at all doubted, because the navigability gets tested in respect of the present goods by its journey from Singapore to Calcutta over high seas and oceans. He, therefore, submits that it is an erroneous finding of the lower authorities that the imported hull has no navigability.

9. He points out that merely because of the goods are going to be used as floating hotel, it does not mean that it has lost its character as a vessel or a ship. Classification under Tariff Heading 89.07 is not correct. He, therefore, prays for setting aside the impugned order and allowing the appeal with consequential relief to the appellants.

10. He has relied on the following citations for different propositions as follows :-

1. 1998 (099) ELT 3 - Union of India v. V.M. Salgaonkar para 20.

Proposition : End-use is not relevant for classification.

2. 1994(08)LCX0098 Eq 1994 (074) ELT 0794 (S.C.)

Proposition : Burden is on the Department to show that a commodity falls under a heading under which Revenue proposes to classify.

3. 1993 (066) ELT 37

Proposition : Chapter Notes are statutory in character and have to be relied upon for classification.

4. (1) 1996 (087) ELT 580

  (2) 1998 (097) ELT 16 para 9

The said two judgments lay down the principle that benefit of doubt in respect of classification should go to the assessee.

10. Opposing the contentions ld. Sr. Advocate Shri R.N. Das for the Revenue submits that during the period 1981-82 to 1985-86 Chapter 89 of CTA contained 3 headings. This change in classification under the new tariff has been brought w.e.f. 28-2-1986. ‘Floating structures’, have been introduced subsequently. He, therefore, submits that the expression floating structure cannot be wished away and has to be properly construed. Regarding various Certificates produced by different authorities, ld. Advocate submits that each authority looks at an article from its own angle and not from the angle of the Customs Act. Therefore, Certificate of Registration or Port clearance certificate etc. is not determinative of classification. For this proposition ld. Advocate relies on 1998 (100) ELT 275 - Commissioner of Customs v. EID Parry (I) Ltd. Referring again to the various Certificates he submits that one certificate describes the goods as ‘vessel’ and another as “hull” and third describes it as a “ship”. It is not the case of the appellants that the imported goods are a Ship. In broad sense, ld. Advocate submits, everything is a vessel including the floating structures. Therefore, it does not mean that merely because a certificate describes the goods as a vessel it cease to be a floating structure. He reiterates the finding of the lower appellate authority relying on the Apex Court judgment in the case of Kumudam Publications (supra) that end-use of a product is not entirely irrelevant. Ld. Advocate, therefore, submits that the finding of classification of the goods under Tariff Heading 89.07 cannot be considered to be unreasonable inasmuch as the end-use of the goods is as a floating hotel which will be ‘generally stationary’. He, therefore, submits that the appeal be rejected.

11. We have carefully considered the pleas advanced from both sides. From a perusal of the headings in the scheme of classification under Chapter 89, as also explained in the General Explanatory Notes, it emerges that this Chapter covers Ships, Boats and other Vessels of all kinds (whether or not self-propelled) and also floating structures. It is not correct therefore to say as urged by the ld. Advocate for Revenue that vessels encompasses the expression ‘Floating Structure’. The tariff classification, therefore, makes clear distinction between vessels and floating structure. The expression vessels , no doubt will include various types of Ships, Boats etc. We cannot ignore the certificates of various authorities such as Port authority of Singapore, International Load Line authority and Bill of lading and Registration Certificate of the Government of West Bengal which have been produced by the appellants herein in support of his contention that the goods imported are a ‘hull’ which is nothing but a part of a Vessel. The imported goods are also navigable otherwise the certificates would not have been issued. It is merely an ipse dixit of the lower authority that the imported goods is not a Vessel because it is not navigable. The Tariff Heading 89.01 to 89.05 are for specific types of vessels. Tariff Heading 89.06 is residuary heading for all other vessels. Since the imported goods do not fall under any of the earlier tariff heading i.e. 89.01 to 89.05, it would clearly fall under Tariff Heading 89.06. This is also made clear by the Chapter Note under Chapter 89, when it says that a hull is to be classified under Tariff Heading 89.06.

12. The mere fact that it is going to be used as a `floating hotel’ does not make the imported goods of the nature as given in Explanatory Notes to Heading 89.07 and referred to in the adjudication order. Those goods namely Pontoons, Floating Tanks, Coffer Dams, Floating Landing Stages, Buoys, Beacons, Re-floating appliances, Paravanes, Rafts of all kinds, Floating structures are all designed to be ‘Generally Stationary". The aforesaid articles are not designed to transport either passenger or goods. The same cannot be said at all of the imported goods, although it may be used as hotel. We are, therefore, clearly of the view that the imported goods are classifiable under Tariff Heading 89.06 and they would, therefore, be entitled to the benefit of the relevant Notification. Consequently, we set aside the impugned order and allow the appeal with consequential relief to the appellants.

13. Before we part with this order, we would observe that Commissioner (Appeals) reliance on Kumudam Publications (supra) is not correct. Apex Court’s observation to the effect that “it may not be entirely correct to say that in no case can the end-use or function of the goods is relevant” came after holding the product under consideration there to be printing plate under Chapter 84 of the Tariff on the basis of either end-use, or “Character and nature” of the goods when it observed as follows:-

“Whether we look at the end-use or to the character and nature of goods, they are in the main plates employed in the printing of newspapers and magazines.”

It would thus be observed that end-use alone has not been made the basis of classification in the case relied upon by the lower appellate authority as is sought to be done by the lower authorities in this case.

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Equivalent 1999 (111) ELT 933 (Tribunal)

Equivalent 1999 (032) RLT 0366