Classification of drilling rigs mounted on motor vehicles whether classifiable under heading 87.05 or under heading 84.30 - Correspondence regardings - Central Excise - 4/89

Classification of drilling rigs mounted on motor vehicles whether classifiable under heading 87.05 or under heading 84.30 - Correspondence regardings Circular No. 4/89 Dated 17-1-1989 [From F. No. 156/41/88-CX.4 ] Government of India Ministry of Finance (Department of Revenue) New Delhi Subject : Classification of drilling rigs mounted on motor vehicles whether classifiable under heading 87.05 or under heading 84.30 - Correspondence regardings. I am directed to say that doubts have arisen as to whether drilling rigs mounted on motor vehicle chassis are classifiable under heading 8430.00 or under heading 8705.00 and the coverage of these headings. In this connection, attention is invited to Notification No. 120/88-C.E., dated 1-3-1988 which provides for exemption to drilling rigs mounted on motor vehicle chassis falling under heading 87.05 from so much of the duty of excise leviable as is equivalent to the duty leviable on the value of chassis and compressor. This notification was amended by notification No. 143/88-C.E., dated 18-4-1988, whereunder it was indicated that the drilling rigs are classifiable under either 84.30 or 87.05. It appears that initially such drilling rigs were classified under 84.00 entitled to benefit of Notification 175/86, and under 87.05 on issue of notification 120/88 on 1-3-1988, but doubts regarding the correct classification of the goods in question under CETA were again raised by notification 143/88. 2. The matter also came up for discussion at the South Zone Tariff Conference held at Bangalore on the 4th and 5th October, 1988 in the context of what is the applicable rate of duty under notification 162/86 which provides at Sl. No. 11, a nil rate of duty paid components are used, and a duty of 15% ad-valorem at Sl. No. 20 specifically on mobile drilling rigs and mobile drilling derricks and are stated to cover vehicles which perform non-transport functions. It was viewed that these are correctly classifiable under heading 8705. 3. The matter has been examined in the Board. The coverage of self propelled and other mobile machines has been clarified in HSN Explanatory Notes at pages 1203-1204 as including, these self propelled machines in which one or more of the propelling or control elements (propelling engine, gear box and controls for gear changing, steering and breaking facilities) are located in the cab of a machine mounted on a wheeled..... chassis and those self propelled wheeled machines in which the chassis and the working machines are specially designed for each other and form an integral mechanical unit. Machines mounted on automobile chassis or lorries have been specifically excluded from 8430. Therefore, in view of HSN Explanatory Notes at page 1204 and 1429 drilling rigs mounted on motor vehicle chassis are classifiable as special purpose motor vehicles under SH 8705.00. As these drilling rigs classifiable under SH 8705, are made from, among other chassis of SH 8706, a new product viz. special motor vehicle comes into existence whose assessable value will be determined on the lines clarified by Board's Circular No. 16/87-CX. 1 (F.No. 6/45/87-CX.1, dated 16-11-1987).