Dredging Corpn. of India Ltd. Vs. Collector of Customs - Court Judgment

Excerpt:
1. the appellants imported a dredger under an import licence and sought clearance of the same under duty exemption in terms of customs notification no. 262 (cus.), dated 11-10-1958. the assistant collector held that 'ocean going vessels' be alone are allowed the benefit of exemption notification no. 262/58-cus. and that the imported dredger was not an 'ocean going vessel'. he therefore, refused to extend the benefit of the notification. the appellate collector also rejected the appeal. hence, the present appeal.2. the appellants at the time of hearing adopted the arguments advanced in another appeal (no. cd/1459/1984-b2 - m/s. dredging corporation of india ltd.) where too the issue was the same. we have disposed of that appeal holding that the dredger imported in that case was to be considered as an ocean going vessel. the present respondents were appellants there and the present appellants were respondents. the goods involved in both the cases are same. we, therefore, do not go into all the grounds once again. the order in the earlier appeal is to be read as a part of this appeal. (order no. 882/86-b2, dated 18-9-1986.) 3. however, there is one feature which was not present in the other appeal but is present here. we examine it now. this feature is that the classification of the present dredger is done under tariff heading no.8905.10 of the first schedule to cta which came into effect on 1-3-1986. the ld. sdr submitted that the classification of the dredger would now be under heading no. 89.05. his statement was that dredgers were separately classified under the tariff 8905.10 and this heading covers only vessels the navigability of which is subsidiary to their main function. the ld. sdr submitted that in the case of the dredger, navigability was subsidiary to their main function namely dredging.therefore, a dredger cannot be considered as an 'ocean going vessel'.4. the ld. advocate argued that navigation does not consist of going on high seas alone and also covers movement of the ship in and around the port where it dredges. he submitted that dredger continuously navigates. he called our attention to the order of the collector (appeals) wherein it was held that there is no dispute that the dredger cannot navigate; the order merely said that navigability is only secondary to the main function, namely, dredging. the ld. counsel for the appellants argued that while primary function and secondary function are relevant for the purpose of classification, these are not so far the purpose of exemption inasmuch as the exemption notification covers 'ocean going vessels' and not vessels falling under heading 8905.10. the ld. counsel also argued that notification 262-cus/58 does not say vessels whose primary function is ocean going, should alone be exempted. he further submitted that the construction and the capability of the vessel should be considered and also the fact that they ordered and imported an 'ocean going dredger'. the ld. counsel said that the dredger was capable of ocean going as proved by the fact that it was brought from holland under its own steam. he further stated that the dredger is capable of going anywhere in the world, if required. in this context, the ld. counsel cited the judgment of the high court in the case of hindustan motors ltd. v. u.o.i. and ors. - [1980 (6) e.l.t.423]. the ld. counsel submitted that this judgment followed earlier judgments of the supreme court and its ratio is directly applicable to the facts of the present case.5. the ld. sdr opposing the argument stated that the primary function of dredger is to carry out the dredging operations and not ocean going.he also referred to the supreme court judgment in m/s. atul glass industries (p) ltd. and expressed that it is the primary function that counts in matters of classification.6. we have examined the arguments of both the sides. we had earlier held in our order no. 882/1986/b2 that the notification no. 262-cus/58 exempts ocean going vessels and that the classification of the vessels under the customs tariff will not be relevant for judging the applicability of the said notification. we had also respectfully referred to the supreme court judgment in m/s. atul glass industries (p) ltd. v. u.o.i, in our earlier order. recalling and following the observations in our earlier order, we do not repeat our findings here.we had in the earlier order observed that the supreme court considered not only the primary function but also the process of manufacture, for purpose of classification under central excise tariff.7. we have respectfully gone through the case law cited by the ld.advocate [1980 (6) e.l.t 423]. this judgment is relevant not only because it deals with a similar question as is here but also because it referred to an important earlier decision of the supreme court. the question before the hon'ble high court was whether dumpers are motor vehicles within the meaning of item 34 of central excise tariff. while holding it was so, the high court examined some aspects relevant to classification of goods. we reproduce an extract of the judgment which is relevant to the present proceedings :- [1980 (6) e.l.t. 423 (del.) judgment of high court in the case of hindustan motors v. u.o.i.] in bolani ores v. state of orissa, air 1975 sc 17 (see paras 24, 25 and 26) this precise question seems to have arisen. it was argued that these vehicles, dumpers, rockers and tractors, are heavy vehicles and are unfit for plying on the road. the supreme court rejected this contention. they said : "but that is not to say that all vehicles which exceed a particular weight are not adapted for use upon roads and are, therefore, not motor vehicles", (p. 26) then it was argued that the proper function of the dumpers is use at the site. repelling the contention the court said : "in respect of all these three types of vehicles (dumpers, rockers and tractors) it cannot be said that they are not "adapted for use upon roads. that they are not so used or are confined for use to only places other than roads or public places is a different matter...." (p. 26) the court referred to the manufacture's description of the vehicle and held that they were 'motor vehicles' and adapted for use upon roads. similarly i have also relied on the manufacturer's manual and have come to the conclusion that the dumpers which are the subject of this petition possess the attribute of being suitable or fit for use upon roads i.e. public roads and are a 'motor vehicle'. the present case in my view is indistinguishable from bolani ores case. counsel for the petitioner contends that this is not the popular or the commercial sense in which dumpers are understood in the commercial world. i was referred to dunlop india ltd. v. union of india - air 1977 sc 597. counsel said that the dumpers of their manufacture and make are particularly suitable for the function of hauling and are unsuitable and uneconomical for the roads on which they would be only a source of danger or damage i was referred to the standards and specifications of the indian road congress recommended for motor vehicles which use roads. counsel argued that these dumpers are generally called 'off-the highway' dumpers and are used in mining and project areas and are never used on the roads. it may be that they are known as 'off-the highway' dumpers in common parlance. but they do not cease to be dumpers. the epithet 'off-the-highway' used in relation to them will not take the vehicle out of the category of 'motor vehicle'. counsel then said that the dominant or primary purpose of 'off-the-highway' dumper is that they are used for hauling large quantities of rocks or mineral ores over short distances and are totally unsuitable and unfit for use on roads. if the dumpers in loaded conditions are allowed to operate on roads they would dig or damage the roads, he said. he called my attention to the indian tariff act where the customs authorities have classified dumpers as "machinery and equipment". similar, he said, is the classification made by brussels tariff nomenclature (btn) where dumpers are categorised as loading and unloading machinery. to this argument the short answer is that it is the definition of 'motor vehicle' as given in item 34 which will govern us and not what has been said in other enactments or literature. the object of the central excise act is to raise revenue and with this end in view the legislature has defined the term 'motor vehicle'. in the context of the act the expression 'motor vehicle' has to be understood. the context must govern the true meaning of the term 'motor vehicle'.we respectfully note the views of the high court and those of the supreme court cited therein and follow the principles laid down by the high court and the supreme court in the judgments cited above. as already mentioned, we had dealt with all the other arguments in our order no. 882/86/b2. we need not traverse the same once again.8. in the light of these observations, we allow this appeal and order that the dredger may be extended the benefit of notification no.262-cus/58 being treated as an 'ocean going vessel'.

Judgment:
1. The appellants imported a Dredger under an import licence and sought clearance of the same under duty exemption in terms of Customs Notification No. 262 (Cus.), dated 11-10-1958. The Assistant Collector held that 'ocean going vessels' be alone are allowed the benefit of Exemption Notification No. 262/58-Cus. and that the imported dredger was not an 'ocean going vessel'. He therefore, refused to extend the benefit of the Notification. The Appellate Collector also rejected the appeal. Hence, the present appeal.

2. The appellants at the time of hearing adopted the arguments advanced in another appeal (No. CD/1459/1984-B2 - M/s. Dredging Corporation of India Ltd.) where too the issue was the same. We have disposed of that appeal holding that the dredger imported in that case was to be considered as an ocean going vessel. The present respondents were appellants there and the present appellants were respondents. The goods involved in both the cases are same. We, therefore, do not go into all the grounds once again. The order in the earlier appeal is to be read as a part of this appeal. (Order No. 882/86-B2, dated 18-9-1986.) 3. However, there is one feature which was not present in the other appeal but is present here. We examine it now. This feature is that the classification of the present dredger is done under Tariff Heading No.8905.10 of the First Schedule to CTA which came into effect on 1-3-1986. The ld. SDR submitted that the classification of the dredger would now be under Heading No. 89.05. His statement was that dredgers were separately classified under the Tariff 8905.10 and this heading covers only vessels the navigability of which is subsidiary to their main function. The ld. SDR submitted that in the case of the dredger, navigability was subsidiary to their main function namely dredging.

Therefore, a dredger cannot be considered as an 'ocean going vessel'.

4. The ld. advocate argued that navigation does not consist of going on high seas alone and also covers movement of the ship in and around the port where it dredges. He submitted that dredger continuously navigates. He called our attention to the order of the Collector (Appeals) wherein it was held that there is no dispute that the dredger cannot navigate; The order merely said that navigability is only secondary to the main function, namely, dredging. The ld. counsel for the appellants argued that while primary function and secondary function are relevant for the purpose of classification, these are not so far the purpose of exemption inasmuch as the exemption Notification covers 'ocean going vessels' and not vessels falling under Heading 8905.10. The ld. counsel also argued that Notification 262-Cus/58 does not say vessels whose primary function is ocean going, should alone be exempted. He further submitted that the construction and the capability of the vessel should be considered and also the fact that they ordered and imported an 'ocean going dredger'. The ld. counsel said that the dredger was capable of ocean going as proved by the fact that it was brought from Holland under its own steam. He further stated that the dredger is capable of going anywhere in the world, if required. In this context, the ld. counsel cited the judgment of the High Court in the case of Hindustan Motors Ltd. v. U.O.I. and Ors. - [1980 (6) E.L.T.423]. The ld. counsel submitted that this judgment followed earlier judgments of the Supreme Court and its ratio is directly applicable to the facts of the present case.

5. The ld. SDR opposing the argument stated that the primary function of dredger is to carry out the dredging operations and not ocean going.

He also referred to the Supreme Court judgment in M/s. Atul Glass Industries (P) Ltd. and expressed that it is the primary function that counts in matters of classification.

6. We have examined the arguments of both the sides. We had earlier held in our Order No. 882/1986/B2 that the Notification No. 262-Cus/58 exempts ocean going vessels and that the classification of the vessels under the Customs Tariff will not be relevant for judging the applicability of the said Notification. We had also respectfully referred to the Supreme Court judgment in M/s. Atul Glass Industries (P) Ltd. v. U.O.I, in our earlier order. Recalling and following the observations in our earlier order, we do not repeat our findings here.

We had in the earlier order observed that the Supreme Court considered not only the primary function but also the process of manufacture, for purpose of classification under Central Excise Tariff.

7. We have respectfully gone through the case law cited by the ld.Advocate [1980 (6) E.L.T 423]. This judgment is relevant not only because it deals with a similar question as is here but also because it referred to an important earlier decision of the Supreme Court. The question before the Hon'ble High Court was whether dumpers are motor vehicles within the meaning of Item 34 of Central Excise Tariff. While holding it was so, the High Court examined some aspects relevant to classification of goods. We reproduce an extract of the judgment which is relevant to the present proceedings :- [1980 (6) E.L.T. 423 (Del.) Judgment of High Court in the case of Hindustan Motors v. U.O.I.] In Bolani Ores v. State of Orissa, AIR 1975 SC 17 (See paras 24, 25 and 26) this precise question seems to have arisen. It was argued that these vehicles, dumpers, rockers and tractors, are heavy vehicles and are unfit for plying on the road. The Supreme Court rejected this contention. They said : "But that is not to say that all vehicles which exceed a particular weight are not adapted for use upon roads and are, therefore, not motor vehicles", (p. 26) Then it was argued that the proper function of the dumpers is use at the site. Repelling the contention the court said : "In respect of all these three types of vehicles (dumpers, rockers and tractors) it cannot be said that they are not "adapted for use upon roads. That they are not so used or are confined for use to only places other than roads or public places is a different matter...." (p. 26) The Court referred to the manufacture's description of the vehicle and held that they were 'motor vehicles' and adapted for use upon roads. Similarly I have also relied on the manufacturer's Manual and have come to the conclusion that the dumpers which are the subject of this petition possess the attribute of being suitable or fit for use upon roads i.e. public roads and are a 'motor vehicle'. The present case in my view is indistinguishable from Bolani Ores case.

Counsel for the petitioner contends that this is not the popular or the commercial sense in which dumpers are understood in the commercial world. I was referred to Dunlop India Ltd. v. Union of India - AIR 1977 SC 597. Counsel said that the dumpers of their manufacture and make are particularly suitable for the function of hauling and are unsuitable and uneconomical for the roads on which they would be only a source of danger or damage I was referred to the standards and specifications of the Indian Road Congress recommended for motor vehicles which use roads. Counsel argued that these dumpers are generally called 'off-the highway' dumpers and are used in mining and project areas and are never used on the roads. It may be that they are known as 'off-the highway' dumpers in common parlance. But they do not cease to be dumpers. The epithet 'off-the-highway' used in relation to them will not take the vehicle out of the category of 'motor vehicle'.

Counsel then said that the dominant or primary purpose of 'off-the-highway' dumper is that they are used for hauling large quantities of rocks or mineral ores over short distances and are totally unsuitable and unfit for use on roads. If the dumpers in loaded conditions are allowed to operate on roads they would dig or damage the roads, he said. He called my attention to the Indian Tariff Act where the Customs authorities have classified dumpers as "machinery and equipment". Similar, he said, is the classification made by Brussels Tariff Nomenclature (BTN) where dumpers are categorised as loading and unloading machinery. To this argument the short answer is that it is the definition of 'motor vehicle' as given in Item 34 which will govern us and not what has been said in other enactments or literature. The object of the Central Excise Act is to raise revenue and with this end in view the legislature has defined the term 'motor vehicle'. In the context of the Act the expression 'motor vehicle' has to be understood. The context must govern the true meaning of the term 'motor vehicle'.

We respectfully note the views of the High Court and those of the Supreme Court cited therein and follow the principles laid down by the High Court and the Supreme Court in the judgments cited above. As already mentioned, we had dealt with all the other arguments in our Order No. 882/86/B2. We need not traverse the same once again.

8. In the light of these observations, we allow this appeal and order that the dredger may be extended the benefit of Notification No.262-Cus/58 being treated as an 'ocean going vessel'.