Cargo ship classification under Customs Tariff Heading 8901 upheld for a bulk cargo transhipper with exemption benefit.

An imported transhipper vessel used for bulk cargo handling was treated as a cargo ship under Heading 8901 rather than as a vessel under Heading 8905, because its navigability was not merely subsidiary to a stationary function. The record showed repeated movement between the port area, anchorage and shore-linked facilities, and the evidence described the vessel as a cargo ship, general cargo ship and bulk cargo transhipper. Heading 8901 HSN notes cover cargo vessels of all kinds, including bulk carriers, while Heading 8905 is limited to vessels whose main function is performed in a stationary position. On that basis, Heading 8905 classification was rejected and exemption under Notification No. 21/2002-Cus. was held available.

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Issues: Whether the imported vessel was classifiable as a cargo ship under Heading 8901 of the First Schedule to the Customs Tariff Act, or under Heading 8905 as a vessel whose navigability was subsidiary to its main function, and consequently entitled to exemption under Notification No. 21/2002-Cus.

Analysis: The vessel was used for transhipment of bulk cargo, and the evidence on record described it as a cargo ship, general cargo ship, transhipper, and bulk cargo transhipper. The classification dispute turned on whether its navigability was merely incidental to a stationary function or whether navigation formed part of its operating function. The lower authorities proceeded on an inconsistent factual premise, while the record showed that the vessel had to navigate between the port area, the anchorage of bulk carriers, and in some modes the shore facility. The Heading 89.01 HSN notes cover cargo vessels of all kinds, including bulk carriers, whereas Heading 89.05 is confined to vessels whose main function is performed in a stationary position. Since the vessel was not always stationary and its navigability could not be treated as subsidiary in the manner assumed by the lower authorities, classification under Heading 8905 was unsustainable. The accepted assessment of a similar vessel under the exemption notification also supported the appellant's claim.

Conclusion: The vessel was correctly classifiable under Heading 8901 of the First Schedule to the Customs Tariff Act, 1975, and the exemption benefit was available.

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