2011(06)LCX0134

IN THE CESTAT, WEST ZONAL BENCH, MUMBAI [COURT NO. I]

S/Shri P.G. Chacko, Member (J) and Sahab Singh, Member (T)

CGU Logistic Ltd.

Versus

Commissioner of Customs (I), Mumbai

Final Order No. A/295/2011-WZB/C-I(CSTB) and Misc. Order No. M/258/2011-WZB/C-I(CSTB), dated 28-6-2011 in Application No. C/MA/(Ors.)/2150/2008 in Appeal No. C/995/2008

Cases Quoted -

Simoson and Co. Ltd. v. Collector -1996(12)LCX0073 Eq 1997 (095) ELT 0166 (S.C.) - Referred [Paras 7,9]

Union of India v. V.M. Salgaoncar & Bros. (P) Ltd. -1998(03)LCX0068 Eq 1998 (099) ELT 0003 (S.C.) - Relied on [Para 3]

Advocated By -

Shri V.M. Doiphode, Advocate, for the Appellant.
Shri Manish Mohan, SDR, for the Respondent.

[Order per : P.G. Chacko, Member (J)]. -

This appeal filed by the assessee is directed against the appellate Commissioner's order upholding the decision of the original authority in respect of classification of a vessel ("M.V. Bulk Prosperity") imported by the appellant vide Bill of Entry dated 3-4-2008. The assessee had classified the vessel under Heading 8901 (SH 8901 90 00) and had, accordingly, claimed exemption from payment of duties of customs under Notification No. 21/2002-Cus., dated 1-3-2002 (serial No. 352). On examination of the goods under the supervision of the Assistant Commissioner (Docks), it was found that the vessel was (a) self-propelled with dedicated conveyor system in stationary position, (b) designed for short trade with service speed of 7 knots, (c) having no hatches to store cargo and (d) not competent to cruise with loaded cargo in the high seas. It was observed that the vessel was neither a cargo carrier nor engaged in transportation of bulk commodities and the same was found to be a bulk transhipper for loading/unloading bulk cargo into small barges in sta-tionary position. Based on these findings arrived at on examination of the vessel, the assessing authority suggested that the vessel be classified under Heading 8905. Subsequently, there was some correspondence between the assessing authority and the assessee. In a letter dated 22-4-2008 addressed to the Assistant Commissioner concerned, the assessee submitted that the vessel was a sea-going ship fitted with mechanical means of propulsion, which would imply that navigability is a primary function of the vessel. They submitted that the primary function of the vessel was to carry and transport cargo from other ships waiting at the bay and unload the same at the port and vice versa. It was submitted that this function was possible because the vessel was self-propelled and could navigate OH its own. In an annexure to the said letter, the full description of the vessel was furnished, wherein dry cargo (coal, iron ore etc.) and agricultural products were specified to be the intended cargo and the purpose of design of the vessel was stated thus : "The vessel shall be designed for short trade (about 20 miles from shore) for discharging of dry bulk commodities from bulk-carriers having maximum air draft 1.8 metres and maximum 45 metres beam and discharging into small barges through a dedicated conveyor system." Another annexure to the said letter was a statement of 'RINA' dated 21-4-2008, which stated that the vessel was designed and built under 'RINA' Rules and under 'RINA' surveillance as sea-going general cargo vessel and that the vessel was intended to carry general cargo within 20 nautical miles from the shore when in operation and manned. The said statement also classified the ship as "general cargo ship". As the assessee waived show-cause notice, the Assistant Commissioner of Customs (Appraising Group VB) considered the submissions of the assessee and passed an order rejecting the classification of the goods claimed by them and, consequentially, denied them the benefit of the aforesaid Exemption Notification. He classified the vessel under SH 8905 90 90 of the First Schedule to the Customs Tariff Act. Aggrieved, the assessee preferred an appeal to the Commissioner (Appeals) and the latter agreed with the decision of the lower authority. Hence the present appeal of the assessee.


2. The miscellaneous application filed by the appellant is for issuance of a direction to the assessing authority to dispose of the importer's application under Section 149 of the Customs Act for amendment of the Bill of Entry. That application, which sought to amend the declared value of the goods, is, apparently, pending with the original authority. It was filed subsequent to the passing of the impugned order.


3, Heard both sides. The learned counsel for the appellant has relied on the following documents in support of the appellant's plea that the vessel imported by them is a "cargo ship" liable to be classified under Heading 8901.

(i) 'Certificate of Class' issued on 16-7-2008 by the Managing Director, Indian register of Shipping (wherein the vessel, viz. "BULK PROSPERITY" is described as "Bulk Cargo Transhipper", deck strengthened for heavy cargoes, cargo handling, inwater survey);

(ii) 'Cargo Ship Safety Construction Certificate' issued on 15-7-2008 by the Principal Officer-cum-Joint DG (Tech), Mercantile Marine De-partment, Government of India (wherein 'BULK PROSPERITY' is described as "Cargo Ship");

(iii) "RINA" Statement dated 21-4-2008 (wherein the vessel is described as "General Cargo Ship" and it is also stated that the ship is intended to carry general cargo within 20 nautical miles from the shore when in operation and manned);

(iv) 'Record of Equipment for the Cargo Ship Safety Equipment Certifi-cate' (for compliance with the International Convention for the Safety of Life at Sea, 1974 as modified by the Protocol of 1988), issued on 15-7-2008 by the Principal Officer-cum-Joint DG (Tech), Mercantile Marine Department, Government of India (wherein details of navigational systems and equipments, life-saving appliances etc. are furnished);

(v) 'Certificate of Survey' issued on 27-5-2008 by the Surveyor, Gov-ernment of India, under Section 27 of the Merchant Shipping Act, 1958 (wherein the vessel is described as "Steel/Transhipper" and the gross tonnage and net tonnage are shown as 10325 and 3283 respectively).

Relying on the above documents, the learned counsel has argued that "BULK PROSPERITY" was imported for use as a 'cargo ship' fitted with all necessary navigational equipments and safety appliances. It is contended that "cargo ship" has been specifically classified under Heading 8901 without any condition attached thereto and, therefore, the vessel in question should be held classifiable under that Heading only. The learned counsel has also claimed support from the Hon'ble Supreme Court's judgment in UOI v. VM. Salgaoncar & Bros. (P) Ltd. 1998(03)LCX0068 Eq 1998 (099) ELT 0003 (S.C.), wherein it was held that transhippers were ocean-going vessels. It is pointed out that Their Lordships rejected the proposition that the question whether a transhipper was an ocean-going vessel could solely rest on the test of its dominant use to which their owners at times put the vessel to. Transhippers were found to be intended to be used mostly to carry cargo from harbours to the high seas and vice versa. They were found often to move into the open sea. Therefore, the Hon'ble Supreme Court held that transhippers could not be excluded from the category of 'ocean-going vessels'. The point sought to be made by the learned counsel is that "BULK PROSPERITY", having been accepted by the lower authorities to be ocean-going vessel, cannot be held to be designed only to function in stationary condition. According to the learned counsel, an ocean-going vessel should necessarily be designed to carry out its primary function while in navigation. To this extent, support is claimed from the Supreme Court's decision.


4. The learned counsel has also submitted that a similar transhipper imported at Goa port in January 2006 was assessed to 'nil' rate of duty under Heading 8901 and that the assessment has been accepted by the department. In this connection, reference is made to Bill of Entry No. 432 dated 19-1-2006, which was filed in respect of "M.V. GOAN PRIDE" and described the goods as "second-hand vessel for transport and transhipment of goods (bulk carrier - transhipper)". It is submitted that the benefit of Notification No. 21/2002-Cus., (serial No. 352) was allowed to the importer of "GOAN PRIDE" by the assessing authority at Goa Customs. Similar benefit is, therefore, liable to be granted to the appellant in respect of "BULK PROSPERITY".


5. The learned SDR has submitted that the vessel was designed for dis-charging dry bulk commodities from bulk carriers into its own holds and then discharging the commodity into small barges through a dedicated conveyor system. In this connection, he referred to one of the documents produced by the appellant, viz. Annexure-I to the assessee's letter dated 22-4-2008 addressed to the Assistant Commissioner. The learned SDR has also produced material downloaded from internet and has referred to different modes of use of transhippers described therein. This literature mentions mainly three modes of transhipment. The first mode involves discharging of cargo from bulk carrier directly into barges by the transhipper. In this mode, the transhipper can also discharge cargo from the bulk carrier into its own holds during the interval between the commencement of voyage of the barge to the shore and the arrival of the barge back at the side of the transhipper. When the barge returns, the transshipment vessel continues to discharge me cargo from the bulk carrier directly into the barge till the bulk carrier is fully discharged. In this mode of transhipment, the transhipper is in a stationary position. In the second mode of transhipment, the transhipment vessel discharges bulk cargo directly into its own holds and then proceeds to the berth to discharge it at the customer's facility ashore. When fully discharged, the transhipper returns to the bulk carrier and repeats the process. In this mode, the transhipment vessel navigates between the bulk carrier and the shore. In the third mode of transhipment, the transhipper discharges cargo from the bulk carrier into barges till the bulk carrier attains comfortable draft to navigate to the shore. The bulk carrier at this stage moves toward the shore and "double banks" with the transhipper alongside the customer's facility. The transhipment vessel then fully discharges the cargo from the bulk carrier into the customer's facility ashore. In this mode of transhipment, the transhipment vessel is stationary for some time off the coast and again stationary for some time alongside the customer's shore facility. In between, the vessel navigates.


6. With reference to the different modes of transhipment, the learned SDR submits that the transhipment vessel is in stationary condition during the course of discharge of cargo from the bulk carrier into the barges or into the customer's shore facility. Therefore, according to the learned SDR, the vessel should be classified under Heading 8905. In this context, the learned SDR has invited our attention to the relevant HSN Notes which indicate that Heading 89.05 covers "Light-vessels, fire-floats, dredgers, floating cranes, and other vessels the navigability of which is subsidiary to their main function". The Note further says that these vessels normally perform their main function in a stationary position. As "BULK PROSPERITY" was designed to perform its function mainly in a stationary position, SDR argues, it should be classified under Heading 8905.


7. In his rejoinder, the learned counsel for the appellant has also referred to the literature downloaded from internet by the SDR. He points out that, in two out of the three modes of transhipment described in the literature, the transhipment vessel navigates as part of its function and hence cannot be classified under Heading 8905. In this connection, he has also claimed support from the Hon'ble Supreme Court's judgment in Simpson & Co. Ltd. v. CCE - 1996(12)LCX0073 Eq 1997 (095) ELT 0166 (S.C.), wherein the court, upholding the Tribunal's decision on classification of I.C. engines for fitment to forklift trucks, held that forklift trucks were vehicles for transport though they moved only limited distances. If forklift trucks which were designed for short distance transport only could be classified as 'transport vehicles' for purposes of Tariff Item 29 of the old Central Excise Tariff, "BULK PROSPERITY" which was designed to carry out its function by navigating within a distance of 20 nautical miles could also be held to be an ocean-going vessel classifiable as cargo ship under Heading 8901, counsel argues.


8. We have considered the submissions. The original authority found that the vessel only transhipped cargo from port area to the bulk carriers and vice versa. In another place of its order, that authority found that the vessel was not competent to carry cargo on its own but could only transfer cargo from one to other barge/place with the help of cranes fitted thereon. Yet in a third place, it was found that handling of cargo in docks and putting it on the big ships and carriers was its main function. By and large, the ratio of the decision of the original authority is that navigability of the vessel is subsidiary to its main function. The importer's contention to the contra was rejected. The learned Commissioner (Appeals) upheld the decision of the lower authority. In our view, an incoherent conclusion arrived at by the original authority came to be sustained with the passing of the impugned order. The view taken by the original authority that navigability is subsidiary to the main function of the vessel inconsistent with its finding that the vessel transships cargo from port area to bulk carriers and vice versa. Admittedly, the bulk carriers are anchored in the outer sea. The vessel in question has to navigate between the port area and the anchorage of the bulk carrier for the purpose of transshipment. Therefore, navigability of the vessel cannot be discounted. Of course, there are other modes of transshipment also, which, however, were not examined by the lower authorities. In the first mode of transshipment spelt out by the learned SDR, 'BULK PROSPERITY' is anchored between a bulk carrier and a barge and discharges cargo from the bulk carrier into the barge by making use of a conveyor belt system. This mode of transshipment is not seen discussed in the impugned order, nor in the order-in-original. In the second mode of transshipment referred to by the SDR, the transhipper navigates between the anchorage of the bulk carrier and the shore. In the third mode of transshipment, it remains stationary at the initial and final stages of the process of transshipment and navigates at the intermediary stage. These modes of transshipment are also not seen discussed in the orders of the lower authorities. Both the orders were accepted by the Revenue.


9. That the vessel in question is used as a transhipment vessel tran-shipping cargo in all the aforesaid modes is not in dispute. That it is an oceangoing vessel as per the judgment of the Hon'ble Supreme Court is also a fact accepted by the Revenue. The various documents produced by the appellant described the vessel as "cargo ship", "general cargo ship", "transhipper" etc. The certificates issued by the Mercantile Marine Department are also significant in this regard. 'Cargo ship' is specifically classified under Heading 8901 irrespective of the extent or degree of its navigability. The HSN Note under Heading 89.01 says that this Heading covers all vessels for the transport of persons or goods other than vessels of Heading 89.03 and life boats, troop ships and hospital ships of Heading 89.06. HSN Heading 89.01 also includes cargo vessels of all kinds (other than tankers and refrigerated vessels) whether or not specialised for the transport of specific goods. The HSN Note proceeds to say that "these include ore vessels and other bulk carriers (for the transport of grain, coal etc.), container ships, Ro-Ro ships and LASH-type vessels". On the other hand, the HSN Notes under Heading 89.05 indicate that the vessels classified under this Heading include light-vessels, drill-ships, fire-floats, dredgers of all kinds, salvage ships for the recovery of sunken vessels, permanently moored air-sea rescue floats; bathyscaphes, pontoons fitted with lifting or handling machines and pontoons clearly designed to serve as a base for these machines. From this Note, it is evident that vessels which function in a stationary position get classified under Heading 89.05. We have already found that the vessel in question is, admittedly, not always in stationary position while carrying out transhipment of cargo. Some modes of transhipment definitely involve navigation. At times, the vessel may be stationary, but this would not ipso facto detract from classification of the vessel as a cargo ship under Heading 8901.


10. The appellant has also contended that a similar vessel was assessed to 'nil' rate of duty in terms of Notification No. 21/2002-Cus. (serial No. 352) by the assessing authority at Goa Customs and that this assessment has not been reviewed by the department. The relevant Bill of Entry evidencing such assessment of a similar vessel at Goa port is available on record. This is an irrebuttable evidence for the present appellant.


11. In the result, the appeal succeeds. The vessel is held classifiable under Heading, 8901 (SH 8901 90 00) of the First Schedule to the Customs Tariff Act and the same shall be assessed accordingly. The Miscellaneous Application filed by the appellant is dismissed as infructuous. The appeal is allowed with consequential relief, if any.

(Dictated in Court)

Equivalent 2011 (274) ELT 0075 (Tri. - Mumbai)