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of <h1>Classification of steel plates as shipbuilding kit parts under tariff item 7308 90 30 upheld in landmark ruling</h1> The steel plates, described as a shipbuilding kit, were classified as 'parts of hulls' under tariff item 7308 90 30. The classification was based on the ... Whether the steel plates is classifiable under SH 8906 90 00 or U/SH 7326 90 80 (parts of ships, floating structure and vessels) - parts of hull are cleared from the factory in separate consignments against different invoices from time to time - parts of hulls, described by the applicant as a ship building kit, which are cleared over a period of time, for use in the manufacture of hulls, are classifiable under 7308 90 30 of the First Schedule to CETA 1985 and not under 8906 90 00 or 7326 90 80 Issues Involved:1. Classification of steel plates proposed to be manufactured by the applicant.2. Interpretation of Chapter Notes and Rules for Interpretation of the Central Excise Tariff.3. Application of judicial precedents and HSN Explanatory Notes.Detailed Analysis:1. Classification of Steel Plates:The applicant, a wholly-owned subsidiary of a foreign company, intends to manufacture and sell steel plates to be used for manufacturing a ship's hull. The primary question is whether these steel plates should be classified under Chapter sub-heading 8906 90 00 or under Chapter sub-heading 7326 90 80 of the Central Excise Tariff.The applicant argues that the steel plates, which are cut and cold-formed through a computer-controlled process and uniquely marked, should be classified under tariff item 8906 90 00 as they form a complete hull in an unassembled state. They contend that Rule 2(a) of the Rules for Interpretation and the Note in Chapter 89 support this classification, as they imply that incomplete or unassembled articles with the essential character of the complete article should be classified as the complete article.2. Interpretation of Chapter Notes and Rules for Interpretation:The Commissioner of Central Excise, Mangalore, argues that the applicant manufactures parts of hulls, not complete hulls. Therefore, the correct classification should be under 7308 90 30, which specifically covers parts of hulls. The Commissioner emphasizes that the applicant does not supply 100% of the items required for the manufacture of a hull, and thus, the classification should reflect the actual condition of the goods at the time of clearance.The Departmental Representative supports this view, stating that classification should be determined based on the condition of the goods at the time of clearance, not their end use. They cite several case laws and the CBEC Manual to argue that recourse to General Interpretative Rules is not permissible when classification can be determined based on chapter and section notes.3. Application of Judicial Precedents and HSN Explanatory Notes:The applicant relies on judgments in the cases of CC Vs Hindustan Motors Ltd. and BAYERISCHL MOTOREN WERKE AKTIENGESELLSCHAFT to support their argument that the steel plates should be classified as a complete hull. However, the Authority notes that these cases are distinguishable. In Hindustan Motors, all parts of an engine were imported under a single bill of entry, whereas in the present case, parts of the hull are cleared in separate consignments over time.The Authority also refers to the HSN Explanatory Notes, which clarify that Chapter 89 covers 'hulls' but excludes unassembled or disassembled parts of hulls. The Explanatory Notes on Chapter 89 and Section XVII reinforce that only complete hulls are covered under Chapter 89, and parts of hulls should be classified under Chapter 73.Conclusion:The Authority concludes that the steel plates, described by the applicant as a shipbuilding kit and cleared over a period of time, should be classified under tariff item 7308 90 30 as 'parts of hulls.' This classification is based on the actual condition of the goods at the time of clearance and the relevant chapter notes and tariff descriptions. The applicant's reliance on Rule 2(a) of the Rules of Interpretation and judicial precedents is not applicable in this case, as classification can be determined under Rule 1 based on chapter notes and headings.Final Ruling:The parts of hulls, cleared over time for use in the manufacture of hulls, are classifiable under 7308 90 30 of the First Schedule to the Central Excise Tariff Act 1985, and not under 8906 90 00 or 7326 90 80. The ruling was pronounced in the open court on February 13, 2009.
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