1984 (7) TMI 388 - AT - Central Excise

Issues Involved:
1. Interpretation of the term "Ocean-going vessels" for exemption under various notifications.
2. Eligibility for exemption under Notification 89/79, 105/80, and 55/75.
3. Determination of duty liability based on the classification of vessels.
4. Relevance of registration under the Merchant Shipping Act for excise exemption.
5. Commercial understanding and technical specifications of vessels as ocean-going.

Issue-wise Analysis:

1. Interpretation of the term "Ocean-going vessels":
The main point for consideration in these appeals is the interpretation of the term "ocean-going vessels." The term does not connote the use to which the vessel is put but aptly describes the conception and design of the vessel rather than their use. The standards prescribed by the American Bureau of Shipping for ocean-going classification were considered, and the contract between the parties indicated that the vessels were for a 650 DWT Ocean Going Vessel. The particulars set out in the contract, such as General Arrangements, Accommodation, Deck fitting and Equipment, Ventilation, Painting and Cathodic Protection, besides Life Saving Appliances, Fire Fighting Apparatus, Light and Sound Signals, and Navigational Equipments, establish that the intention of the contract was for the manufacture of ocean-going vessels. The appellants' vessels had actually travelled from Magdalla to Marmagoa, showing they were capable of ocean travel.

2. Eligibility for exemption under Notification 89/79, 105/80, and 55/75:
The appellants submitted that the exemption granted by Notification No. 104/82 was irrespective of the exemption granted by Notifications 89/79 and 105/80. The Assistant Collector rejected the contention that the barges manufactured were ocean-going vessels within the meaning of the term as contained in Notification No. 55/75. The appellants argued that the definition contained in other Acts was not relevant for deciding the issue of classification under the Central Excise Act and that the determination of excisability of a product should be at the point of its manufacture. The vessels were designed, constructed, and classified as ocean-going vessels, as evidenced by the American Bureau of Shipping certificate and the contract specifications.

3. Determination of duty liability based on the classification of vessels:
The determination of duty liability of a product under the provisions of the Central Excises and Salt Act, 1944, arises at the point of manufacture. The lower appellate authority's reliance on non-registration under the Marine Shipping Act was deemed untenable. Registration or non-registration arises subsequent to the manufacture and will not be the sole criterion to decide their excisability. The vessels in question were capable of ocean travel, and the necessary permissions for sea passage were granted, reinforcing their classification as ocean-going vessels.

4. Relevance of registration under the Merchant Shipping Act for excise exemption:
The lower appellate authority's decision was based on the definition of "sea-going vessel" under the Merchant Shipping Act, which was deemed irrelevant for the purpose of classification under the Central Excise Act. The vessels were registered for a single journey under Section 406 of the Merchant Shipping Act, and the absence of a general license did not disqualify them from the exemption. The vessels were designed and constructed for ocean travel, meeting the criteria for exemption under the relevant notifications.

5. Commercial understanding and technical specifications of vessels as ocean-going:
The appellants produced certificates and evidence showing that the vessels were built to the standards of the American Bureau of Shipping and were intended for unrestricted ocean service. The vessels were equipped with engines and technical requirements suitable for ocean travel. The commercial parlance and technical specifications confirmed that the vessels were considered ocean-going. The subsequent notifications and trade notices further reinforced the classification of the vessels as ocean-going, entitling them to the exemption sought.

Conclusion:
The impugned orders were set aside, and the appeals were allowed, recognizing the vessels as ocean-going and eligible for the exemption under the relevant notifications. The interpretation of "ocean-going vessels" was based on their design, construction, and capability for ocean travel, rather than their actual use or registration status.

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