Ocean-going vessel exemption turns on design and capability at manufacture, not later Merchant Shipping Act registration.

For excise exemption purposes, the expression "ocean-going vessels" was treated as referring to a vessel's conception, design, and capability for ocean service, not its actual later use. Contract specifications, classification evidence, and a certificate showing unrestricted ocean service supported that the barges and vessels were built for ocean-going use. Permission for sea passage and actual movement to sea were corroborative only. Excisability had to be assessed at the stage of manufacture, so non-registration or later compliance issues under the Merchant Shipping Act, 1958 did not control the exemption. On that basis, the vessels qualified for the notification and the duty demands could not stand.

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Issues: Whether the barges and vessels manufactured by the assessee were "ocean-going vessels" eligible for exemption under the relevant Central Excise notifications, and whether non-registration or the requirements of the Merchant Shipping Act, 1958 could defeat the exemption.

Analysis: The description "ocean-going vessels" was held to denote the conception, design, and capability of the vessel rather than its actual end use. The contract specifications, classification by the American Bureau of Shipping, and the certificate showing that the vessel was built for unrestricted ocean service supported the conclusion that the vessels were designed and constructed for ocean service. Permission granted by the Mercantile Marine Department for sea passage and the fact that the vessels had in fact proceeded to sea were treated as strong corroborative circumstances. The determination of excisability was also to be made at the stage of manufacture under the Central Excises and Salt Act, 1944, so subsequent registration or non-registration under the Merchant Shipping Act, 1958 was not the controlling test. The definition in Section 3(41) of the Merchant Shipping Act, 1958 and the licensing provisions in Section 406 of that Act did not impose a further condition in the exemption notification. Later notifications and trade notices were treated as reinforcing the broader understanding of the expression.

Conclusion: The vessels were ocean-going vessels within the exemption notifications, and the duty demands were not sustainable.

Ratio Decidendi: Where an excise exemption for ocean-going vessels uses that description without tying it to actual end use or Merchant Shipping Act registration, the decisive test is whether the vessel was designed, constructed, and capable of ocean service at the time of manufacture.

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