Assessable Value and Ocean Going Vessel Exemption for Wooden Fishing Boats Under Central Excise

Separately supplied bought-out accessories that were not manufactured by the assessee and were not fitted to wooden fishing boats at the time of clearance were not includible in the boats' assessable value for central excise purposes. The boats were assessed as cleared from the yard under a residuary tariff entry, so the eventual use of the accessories did not make them part of the excisable value. The boats were also treated as falling within the expression "ocean going vessels", which was construed broadly enough to cover sailing and fishing vessels, and the exemption claim was accepted on that basis.

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Issues: (i) whether the value of bought out accessories supplied separately with wooden fishing boats was includible in the assessable value of the boats for levy of central excise duty; (ii) whether the wooden fishing boats qualified for exemption as ocean going vessels.

Issue (i): whether the value of bought out accessories supplied separately with wooden fishing boats was includible in the assessable value of the boats for levy of central excise duty

Analysis: The boats were classifiable under Tariff Item No. 68, a residuary entry, and were assessed in the form in which they were cleared from the boat building yard. The accessories were not manufactured by the assessee, were purchased from outside, supplied separately, and were not fitted to the boats at the time of clearance. In that setting, the essentiality of the accessories for eventual use did not justify their inclusion in the assessable value of the boats.

Conclusion: The value of the bought out accessories was not includible in the assessable value of the boats and this issue was decided in favour of the assessee.

Issue (ii): whether the wooden fishing boats qualified for exemption as ocean going vessels

Analysis: The expression ocean going vessels was treated as broad enough to cover sailing vessels and fishing vessels, and the boats in question were described as sailing vessels in the relevant records. The wider understanding of vessel supported the exemption claim under the relevant notifications.

Conclusion: The wooden fishing boats were eligible for exemption as ocean going vessels and this issue was decided in favour of the assessee.

Final Conclusion: The appeals succeeded because the accessories were not part of the assessable value of the boats and the boats themselves fell within the exemption category relied upon by the assessee.

Ratio Decidendi: For goods cleared under a residuary tariff entry, separately supplied bought out accessories not manufactured by the assessee and not fitted at clearance are not includible in assessable value, and the expression ocean going vessels may extend to fishing boats on a broad functional understanding of vessel.

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