ORDER
J.H. Joglekar, Member (T)
1. The appellants imported one Drill Ship for scrapping and filed Bill of Entry on 20-8-1992 for clearance thereof. At the material time the quantum of duty was to be determined by reference to the “Light Displacement Tonnage (L.D.T)” of such vessels. The definition of LDT reads as under :
“Light Displacement Tonnage (LDT) means LDT in MTs as per builder’s registered L.D.T. referred to in the Stability Book or the Builder’s Certificate.”
2. They produced a certificate dated 29-6-1992 from American Bureau of shipping. The Certificate reads as follows :
“This is to confirm that on the basis of documents already in our records, the light ship weight of the vessel after being converted in 1975 is 9,609.25 long tons without any ballast.”
3. The Memorandum of agreement witnessing the purchase by the appellants described the price as US $ 176 per long tons of LDT, excluding permanent blast, in accordance with the certificate from the ABS referred to above. A report of M/s. Ericson & Richards at Bombay, citing the ABS certificate reconfirmed the LDT. It also cited the vessels capacity plan, showing the LDT of the ship as 14,806.75/- long tons including permanent ballast which consisted of 4649.01 long tons of Baryte. The vessel was assessed to duty provisionally pending receipt of Trim and Stability Book/Builder’s certificate. In the absence of the book, the department proposed to quantify duty on the basis of LDT including permanent ballast. The Department also sought opinions as to the calculations of the LDT, from M/s. Mazgaon Dock Ltd. as also from Shri Sharma, Naval Architect, Shri Choudhary a Marine Engineer and the Director General of Shipping. After disclosing the evidence and after hearing the importers, the Assistant Collector held that ballast was part of LDT of a vessel and was, therefore, chargeable to duty. On the assessment being finalised by the Assistant Collector on this ground, the importers filed an appeal.
4. The Commissioner (Appeals), after framing the question as to how the LDT was to be calculated discussed the aspects of natural justice, dutiability of broken ships and applicability of Notification No. 167/86-C.E. and the leviability of CVD. The issue framed by him was not discussed by the Collector (Appeals) at all. He, however, upheld the order resulting in the present appeal being filed.
5. We have heard Shri M.H. Patil, Counsel appearing with Shri A.D. Maru, Adv. and Shri R.K. Ghadge, Consultant. We also heard Shri A. Ashokan, ld. JDR for the Revenue.
6. The single issue for determination in this case is whether in calculating the LDT of a vessel, the ballast has to be taken into account or not.
7. The term “Tonnage” in shipping industry is used in different contexts. Displacement tonnage of a vessel is the weight of water that the ship displaces. Loaded displacement tonnage is the weight of the vessel fully loaded with cargo, passengers, fuel, stores and crew. Light displacement tonnage is the weight of the vessel, without cargo, passengers, fuel, stores and crew. Deadweight tonnage (DWT) is the difference between light displacement tonnage and full displacement tonnage. The query made by the customs in finalising the assessment to the various experts was whether permanent ballast could be included in determining the LDT of a vessel. Ballast is defined as heavy matter, as water, sand stones or iron, carried in the bottom of a ship, to increase its weight and prevent its being readily overset (Words and Phrases of Central Excise and Customs second edition by Sarkar).
8. The query posed by the Customs was answered in different manners by experts. In two communications the Mazagaon Docks Ltd: opined that the permanent ballast of a vessel was always part of a light ship, and never part of a deadweight vessel (dwt). Shri S.K. Choudhary, Consultant Marine Engineer in his opinion conveyed to the Customs opined that light ship weight was without any cargo or any ballast. The Director General of Shipping in their letter dated 30-11-1993 defined LDT as displacement in tons without cargo, fuel, oil, passenger, crew stores as well as ballast. No opinion was offered by Shri N.D. Sharma the Naval Architect.
9. Shri Patil also referred to a letter from M/s. Metal Scrap Trading Co. addressed to some other corporate entity to the effect that in calculating DLT the ballast is not included.
10. The Assistant Collector relied on the opinion of the Mazagaon Ltd. in preference to the other expert opinion.
11. To put the issue in perspective, the relevance of ballast has to be seen. As the definition above shows, ballast is added to the ship to ensure stability while in motion. The need for ballast varies according to the types of ships. A cargo vessel will generally be stable, if it is fully laden. When it is not fully laden, it may need to take on board some ballast, to achieve the degree of stability required. The requirement of ballast would also vary according to the weather conditions. A passenger ship would generally carry ballast, as there would be no weighty cargo but only lightweight people. The quantum of ballast would thus, continuously be changing.
12. Trim and stability are conditions which indicate the requirement of ballast for the ship. If the ship has less cargo on one side than on the other side, to maintain the trim, some ballast has to be taken on that side where the cargo is less in weight.
13. The dividing line between the permanent ballast and temporary ballast is a little hazy. When the ship is first built, it is put into water and its stability is decided by an inclining test. The inclining test is conducted by moving a series of known weights in the trans-verse direction and then measuring the resulting change in the equilibrium heel angle of the ship. The data collected by the inclining test is applied to the naval architectural principles to determine the ship’s Vertical Centre of Gravity (VCG). Sometime due to an error in design or construction it may happen that the ship develops a list which may require to be corrected. This is done by welding a receptacle to the hull and loading it with iron weights. Altough this is called a permanent ballast, it is impermanent in nature inasmuch as this weight can be obviated by, utilising a cargo loading plan, which takes into account this degree of list. The temporary ballast is used in operational condition to offset the loss of stability when the weight as well as the distribution of the cargo is less than optimum. The temporary ballast generally is water but can be mud, sludge or some equally worthless material. The material has to be worthless because on receipt of the cargo, this ballast has to be thrown away. And only worthless things can be discarded without regret or financial loss.
14. Thus, the phenomenon of permanent ballast is not a universal phenomenon but occurs in a microscopic percentage of cases involving list when the ship is first put into water after construction. Such a rare event and occurrence cannot be a parameter determining fixed permanent values. The temporary ballast is an ever changing phenomenon and therefore, for the same reason cannot become an element of calculation, in determining normal values.
15. We have seen the expert opinions. That of the Mazgaon Docks Ltd. is cryptic and although it refers to some glossary notes and notifications it does not enclose any. The opinion of the Director General of Shipping is very clear. It also clarifies that ships generally are not designed and manufactured to have permanent ballast. It also specifies that where the stability report refers to ballast it is in the case of liquid ballast, (temporary ballast) and therefore, not includible in the LDT. The opinion of Shri Choudhary, is well documented and well reasoned and takes into account the subsidiary queries raised by the Customs.
16. During the hearing Shri Patil, ld. Counsel referred to certain notifications under Section 34 of the Customs whereby the loading or unloading of ballast was not required to be supervised by the Customs officers. It is his claim that because the ballast is worthless its loading and unloading was not supervised and for the same reason, its weight and value should not be included for the purpose of calculating LDT. This argument apparently was made to counter the discussion in the Order-in-Original, as to the nature and value of baryte which was the material used in ballast, in the present case. In our opinion, this is not a relevant issue. The determination of LDT is to be done by the definitions given in marine technology and engineering and the monetary value of the constituent of ballast is of relevance, but not determinable.
17. We have also seen the citation of Order No. 1386/98-WZB, dated 23-6-1998 in Appeal No. C/356/92-Bom., reported in 1999 (112) E.L.T. 331 in the case of M.P. Steel Corporation v. C.C., Rajkot. In that case, the Tribunal accepted the LDT as shown in the stability book given by the builder in terms of the definition in the Tariff Before the Tribunal, the revenue held that the duty on the permanent ballast should be assessed on merits. The Tribunal observed that the submission was not relevant to the issue before them. On perusal, we find that the ratio of this judgment, is not relatable to the facts before us at all inasmuch as the problem in the present case is arising in the absence of the stability book.
18. Shri Patil also referred to some discussions between the Chairman of CBEC and the assessees of Rajkot Collectorate on this issue. On examination of the minutes we find that on perusal of the minutes, no specific conclusion can be arrived at.
19. Thus on perusal of the expert opinions on record as also on examination of the relevance and importance of ballast in the design and operation of marine vessels, we hold that for calculation of LDT, the ballast whether permanent or temporary, is not to be included.
20. Appeal is allowed in these terms with consequential relief if any, as per law.