Judgment:
1. These appeals arise from a single Order-in-Original No. 38/CEX/1990, dated 7-9-1990 passed by Collector of Central Excise, Pune demanding amounts of Central Excise duty of Rs. 79,857,55, Rs. 5,26,200/- and Rs. 11,43,016.00 from the first mentioned appellant, M/s. Bharati Shipyard Private Ltd. and imposing penalty of Rs. 50,000/- on them besides imposing a penalty of Rs. 5,000/- on the second mentioned appellant, M/s. Travancore Cements Pvt. Ltd. confiscating one dredger seized from them but giving an option for their release subject to payment of fine of Rs. 1,50,000/- in lieu of confiscation. Both the appeals are disposed of by this common order.
2. On behalf of M/s. Travancore Cement Pvt. Ltd., learned Counsel, Shri Joseph Kodianthara submitted that they had placed orders with appellant No. 1 for construction and delivery of one dredger and two barges. For the dredger they had paid the price charged including Central Excise duty as shown in the relevant Gate Pass. If, in fact, their supplier had not paid any Central Excise duty on the dredger then they are not responsible for any irregularity. The confiscation of the dredger seized from their possession and imposition of penalty on them ordered by the Collector is not justified, he contended. On merits he did not contest the demand of duty but stated that it is for the manufacturer to comply with the requirement and as bona fide purchasers of goods for value they had not committed any irregularity.
3. On behalf of the other appellant M/s. Bharati Shipyard (P) Ltd., Shri Ashok Mehta, learned Counsel stated that the show cause notice in respect of the dredger and two barges supplied by them to M/s.
Travancore Cements (P) Ltd. was issued alleging short payment of duty of Rs. 6,28,354.69 consisting of Rs. 4,90,995.19 for the dredger and Rs. 1,37,359.50 for the two barges. Another show cause notice was issued to them in respect of a tug supplied by them to Calcutta Port Trust alleging short payment of duty of Rs. 79,857.56. However, while passing the impugned order the Collector, while confirming the demands as per the notice except in respect of the barges where the demand was confirmed only for Rs. 35,205.00 as against the proposed demand of Rs. 1,37,355.50, had ordered that duty of Rs. 11,43,016.00 should be paid by them by debit to their PLA. This amount was actually not covered in the show cause notice. On merits the learned Counsel submitted that the dredger and barges were exempt from duty vide Notification No. 234/82, dated 11-1-1982. The Pune Collectorate had issued a Trade Notice 32/84 clarifying that the term "ocean going vessels" figuring in the aforesaid exemption Notification will include, inter alia hopper barges for the disposal of dredged material, tugs and dredgers. The goods in question were thus eligible for exemption from duty. He referred to the Tribunal decision in Vipul Shipyard v. Collector of Central Excise, Bombay, 1985 (19) E.L.T. 122 wherein it was held that barges are ocean going vessels for the purpose of exemption from Central Excise duty under Notification 55/75, dated 28-2-1982. In conclusion learned Counsel stated that the appellant is a Private Limited Company promoted by technocrats who were not conversant with excise matters. There was no intent to evade duty. They were guided by the Collectorate' Trade Notice regarding exemption for barges, dredgers and tugs, as ocean going vessels. The longer time limit was not applicable in the circumstances.
4. Shri M. Ali, Departmental Representative resisted the submissions made in support of the appeals. Appellant, Bharati Shipyard (P) Ltd. had issued Gate Pass mentioning the duty amount and has also collected the same from the customer M/s. Travancore Cements (Pvt.) Ltd. But duty was actually not paid by debit to the Personal Ledger Account. As regards the amount of duty stated in the show cause notice it was the differential duty amount on account of cost escalation. There was an escalation clause in the agreement entered into between the two companies and the duty demand is limited to the escalation bill. When there is an escalation clause in the agreement regarding the price for the goods, the assessment is to be taken as provisional and hence the notice was not barred by limitation. He relied for this submission on the Tribunal decision in Indian Aluminium Cables v. CCE, New Delhi, 1997 (95) E.L.T. 386. There was misstatement of value as the cost of the imported parts provided by the purchaser (Appellant No. 2 here) did not take into account the Customs duty paid thereon. On merits also, he supported the Collector's order as the dredgers and barges were not ocean going vessels to get the benefit of exemption from duty under the Notification in question. The Collector has gone by the decision of the High Court of Bombay in Chowgule & Co. Pvt. Ltd. v. Union of India, 1988 (38) E.L.T. 401 for deciding the question as to what is an ocean going vessel. This decision which is of the year 1987 is to be taken as superseding the Trade Notice issued by the Collectorate in 1984.
Applying the said judgment to the present case and taking into account the fact that the dredger was for use in Kottayam lake to dredge lime shells, the same cannot be treated as ocean going vessel.
5. We have considered the rival submissions and perused the record. The Collectorate Trade Notice relied upon by the learned Counsel for the appellant (Bharati Shipyard Private Ltd.) is specifically with reference to exemption Notification 234/82-C.E., dated 1-11-1982 in respect of Central Excise duty for indigenously built barges tugs, dredgers etc. The judgment of the High Court of Bombay in Chowgule & Co. Pvt. Ltd. v. Union of India, 1988 (38) E.L.T. 401 (Bom.) followed by the Collector in his impugned order related to imported vessels (trans-shippers) meant for transhipment of goods from one vessel to another or to bring the goods after they are unloaded from other vessels in midstream to the port. They were held to be not ocean going vessels. As against such a decision we find that the Tribunal had held in Vipul Shipyard v. Collector of Central Excise, 1985 (19) E.L.T. 122 that Barges are ocean going vessels. To similar effect is another decision of the Tribunal vide Order No. 954/86-B2 dated 24-9-1986 - 1995 (79) E.L.T. 262 (T) (Dredging Corporation of India Ltd. v. C.C.Bombay) holding that a dredger imported by that appellant was entitled to the benefit of Notification 202-Cus./58 as ocean going vessel. This appeal was challenged by the Collector through Civil Appeal 5/87 filed in the Supreme Court but was dismissed as withdrawn on 7-5-1991 as reported in 1991 (55) E.L.T. A33. The withdrawal of the appeal by the Government points to a perception on their part that dredger is an ocean going vessel which also accords with the contents of the Trade Notice issued by the Pune Collectorate. It was pleaded before us that Bombay Collectorate had also issued a similar Trade Notice and it was also submitted that a manufacturer in that Collectorate, Mazagaon Docks had cleared dredgers free of duty as ocean going vessel. This was pleaded by the appellant before the Collector also but it was not accepted by him. In view of the Trade Notice which is binding on the department, we are inclined to accept the plea about the dredgers, barges and tugs being cove red by the exemption Notification. The alternative plea that the order of the Collector directing the appellant, Bharati Shipyard to debit a sum of Rs. 11,43,016.00 from their Personal Ledger Account was beyond the scope of the show cause notice is valid as the notice did not cover the same. On this ground also the said direction in the impugned order deserves to be set aside.
As the appeal is allowed on merits, we are not recording a finding on the plea of limitation. The confiscation and penalty imposed on both the appellants are set aside.