2023 (3) TMI 1009 - SC - Central Excise

Classification of imported goods - Cutter Suction Dredger along with other accessories and equipments including Pipes, Anchor Boats, Multicats, Dredging pumping units, Engines and other spares and accessories - to be classified under the Chapter Heading 8905 10 00 of the Customs Tariff Act, 1975 or not - Applicability for benefit of Nil rate of duty, in terms of Notification No. 21/2002- CUS dated 01.03.2002 - Assistant Commissioner was of the opinion that the multicats, M.S. pipes, imported dredging pumping units and other goods were classifiable under different tariff headings and were not entitled to exemption under the notification as DREDGERS . HELD THAT - This Court after relying upon SARASWATI SUGAR MILLS VERSUS COMMISSIONER OF CENTRAL EXCISE, DELHI-III 2011 (8) TMI 4 - SUPREME COURT and taking aid from the dictionaries held that the Guide Car could not be said to be a component of the Coke Oven Battery. It was submitted that by the same analogy, the pumping units, air compressors, pumps, pipes, wire mesh, steel angle plates and outward engine boat, all of which were granted the benefit of exemption notification, cannot be considered components . It was besides urged that the Appellate Commissioner had disregarded Note 2 to Section XVII of the Act which had clearly excluded the articles in question; they had to be classified separately under the relevant heads. The Appellate Commissioner considered the previous order in Boskalis Dredging India Pvt. Ltd. 1999 (2) TMI 700 - SC ORDER and dealt with each item separately. It was noticed that the dredger pumping units are essential for the cutter suction dredgers unlike in the case of hopper dredgers. Furthermore, the use of air compressors is also necessary to ensure a continuous supply of air to the booster pumps. The Appellate Commissioner took care to exclude some of the claims made by the appellant towards generators, consumables lathe etc. Likewise, the Appellate Commissioner allowed the claim for exemption in respect of steel angle plates, pipes, and wire mesh which was held to be useful for the erection of booster pump stations. A plain reading of the Note 2 of the Section XVII shows that parts and parts of accessories cannot apply to specified articles, including items classifiable under 8401-79, 8481-82, and to some extent, 8483. In the present case, in this Court s view, the error committed by the CESTAT is that each of the excluded items has been treated as a separate part and not integral to the functioning of a Cutter Dredger. Without the compressors and the pipes necessary to pump the dredged material, the cutter dredger would cease to function as such. The other items, likewise, are integral parts of the Cutter Dredger, even though they might independently be utilized, for other purposes. The test is not whether multiple uses are possible but whether these parts are essential for the purpose of dredging in a Cutter Dredger. As far as the exclusion of generators is concerned, this Court notices that concurrently the order in appeal, as well as the order of the CESTAT, have excluded it from the benefit of the exemption notification. The Court finds no reason to interfere with those findings. Decision in the case of M/S STEEL AUTHORITY OF INDIA LIMITED VERSUS COMMISSIONER, CENTRAL EXCISE CUSTOMS 2022 (9) TMI 740 - SUPREME COURT distinguished. The impugned order is hereby set aside. The order of the Appellate Commissioner is accordingly restored - Appeal allowed.

Summary

Issues Involved:
1. Classification of imported goods under the Customs Tariff Act, 1975.
2. Eligibility for exemption under Notification No. 21/2002-CUS dated 01.03.2002.
3. Interpretation of Note 2 to Section XVII of the Customs Tariff Act.
4. Applicability of previous judicial decisions.

Detailed Analysis:

1. Classification of Imported Goods:
The appellant imported a "Cutter Suction Dredger" along with various accessories and equipment, classified under Chapter Heading 8905 10 00 of the Customs Tariff Act, 1975. The Assistant Commissioner classified multicats, M.S. pipes, dredging pumping units, and other goods under different tariff headings, denying them exemption as "DREDGERS."

2. Eligibility for Exemption:
The appellant claimed a Nil rate of duty based on Notification No. 21/2002-CUS dated 01.03.2002, supported by a Chartered Engineer's certificate. The Appellate Commissioner granted relief, holding that nine items were entitled to exemption, referencing the case Boskalis Dredging India Pvt. Ltd. vs. Commissioner of Customs, Bhubaneshwar [2001 (135) E.L.T. 1396].

3. Interpretation of Note 2 to Section XVII:
The CESTAT reversed the Appellate Commissioner's decision, interpreting Note 2(e) to Section XVII to mean that "parts" and "parts of accessories" could not apply to certain articles. The CESTAT held that the items in question were separate articles and not integral parts of a Cutter Dredger.

4. Applicability of Previous Judicial Decisions:
The appellant argued that the CESTAT wrongly interfered with the Appellate Commissioner's determination and relied on the decision in Commissioner of Customs vs. Boskalis Dredging India Pvt. Ltd. [2002 (139) ELT A 313 (SC)]. The revenue cited Steel Authority of India Ltd. vs. Commissioner, Central Excise & Customs, Bhubaneshwar [2022 SCC Online (SC) 1232], arguing that the items could not be considered "components."

Judgment Analysis:

The Supreme Court analyzed the function and necessity of each item in the context of a Cutter Suction Dredger. The Court noted that without the compressors and pipes necessary to pump the dredged material, the cutter dredger would cease to function. The Court emphasized that the test is whether these parts are essential for the purpose of dredging in a Cutter Dredger, not whether multiple uses are possible.

The Court found that the CESTAT erred by treating each excluded item as a separate part rather than integral to the functioning of a Cutter Dredger. The reliance on Note 2 was deemed insubstantial because the items were essential for the dredger's operation.

The Court also distinguished the present case from Steel Authority of India Ltd., noting that the guide cars in that case were not essential for the coke oven battery's functioning. In contrast, the items excluded by the CESTAT were integral to the Cutter Dredger.

Regarding the exclusion of generators, the Court upheld the concurrent findings of the Appellate Commissioner and the CESTAT, finding no reason to interfere.

Conclusion:

The Supreme Court set aside the CESTAT's order and restored the Appellate Commissioner's order, allowing the appeal in part. The items excluded by the CESTAT were deemed integral parts of the Cutter Dredger and thus eligible for exemption under Notification No. 21/2002-CUS. The Civil Appeal was allowed in part, and pending applications were disposed of.