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Mingoa Pvt. Ltd. and anr. Vs. Union of India (Uoi) and ors. - Court Judgment

LegalCrystal Citation
SubjectCustoms
CourtMumbai High Court
Decided On
Case NumberWrit Petition No. 108/B of 1975
Judge
Reported in1983(2)BomCR720
AppellantMingoa Pvt. Ltd. and anr.
RespondentUnion of India (Uoi) and ors.
Appellant AdvocateS.K. Kakodkar, Adv.
Respondent AdvocateRamesh Sardesai, Adv.
Excerpt:
customs - mining machinery - item 72 (b) and 72 (18) of indian customs tariff - petitioner challenged order of joint secretary of government - by impugned order some machinery of petitioners covered under item 72 (b) - no presence of any material to contrary being produced by department - view expressed in certificates by people in trade of mining uncontroverted and deserves to be accepted - concerned machinery considered in mining industry as basic 'mining machinery' and also considered as per general trade usage - held, concerned machinery 'crawler tractor' classified as 'mining machinery' falling under item 72 (18). - - and the said extreme service under carriage equipment, coupled with life-time lubrication of the truck rollers offered exceptional resistance to abrasion, dust..........'mining machinery' appeared, sought to define the said term 'mining machinery' as under :---'the item 'mining machinery' under item 72(18), therefore, would have to be considered as machinery as such used for mining and anything that would be an intrinsic part of such machinery could only be considered as mining machinery.'19. this court also in para 19 of the judgment, after referring to certain chapters in kempes engineering year-book for 1975, (80th edition) pointed out :---'.........looking to the above factors, particularly, to the classification of various types of machines according to their purpose under chapter xvi of the act which includes 'mining machinery' has to be given a restricted meaning so as to mean that machine which is used essentially and intrinsically for the.....
Judgment:

D.M. Rege, J.

1. This writ petition is by a Company called Mingoa Pvt. Ltd., challenging the order of the Joint Secretary to the Government of India, Dt. 1-3-1975, upholding the order of the Collector of Customs (Appeals) Dt. 15-1-1974, who also confirmed the order of Assistant Collector of Customs (Appraising) Dt. 22-1-1972, who held that certain machinery of petitioners viz. two units of Caterpillar D-9-G Crawler Tractor, with attachments viz. one dozer and one ripper, were covered under Item 72(b) of the Indian Customs Tariff.

2. A narrow question arising in this writ petition was : whether the petitioners' said machinery would fall under Item 72(18) of the Schedule to the Indian Customs Tariff, dealing with the 'Mining Machinery' or under Item 72(b), thereof dealing with the machinery in general, not otherwise provided in the said Schedule

3. Few facts leading to the dispute covered in the present petition may be set out at the outset.

4. The petitioners are a mining concern, having its office in Goa. Their business, is wholly that of mining, i.e. extraction of mineral ore and exporting the same. They are one of the largest mine owners and exporters of iron ore form the territory of Goa. In the course of their mining business the petitioners employ various machineries for speedier extraction of ore. Since the petitioners needed for the purpose of mining, some specialised machines, which were not available in India, they imported the same from U.S.A. In the present case they desired to import two units of Caterpillar D-9-G, Tractors with dozer and ripper attachment known as Crawler Tractors. The said Crawler Tractors were equipped with hydraulic powered dozer model 96 and hydraulic ripper attachment model D-9 and were, according to the petitioners conceived and primarily designed as mining machinery. According to the petitioners under carriage equipment of the Crawler Tractors such as the trucks, the trucks rollers, the idlers, etc. were built of heavy duty construction and though alloy steel to suit operation in extreme service conditions encountered in iron ore mining; and the said extreme service under carriage equipment, coupled with life-time lubrication of the truck rollers offered exceptional resistance to abrasion, dust were and tear. Thus, according to the petitioner, the said Crawler Tractors were ideally suited machines for operations in iron ore mining and their use in any other operations, such as earth moving or soft soils etc., was non judicious, uneconomical and detrimental to the machines themselves.

5. The petitioner, therefore, applied to the Directorate of Industries and Mines, Government of Goa, Daman and Diu for essentiality certificate for the import of the said Crawler Tractor. In reply, the said Directorate of Industries and Mines, of Government of Goa, Daman and Diu, by his letter Dt. 15th November, 1969, addressed to the Chief Controller of imports and Exports, New Delhi, forwarded the said application of the petitioners, recommending in the said letter the import of the said Crawler Tractors, by the petitioners as requested by them in the said application enclosed to the said, letter. The application for essentiality certificate, (Ex. B to the petition) specifically stated against the item : the article proposed to be manufactured, as 'extraction of iron ore' and against the item of description of the machinery and equipment, it mentioned as 'two units Caterpillar D-9, Series G, Crawlers Tractors, Tractor with accessories and Parts. The Directorate of Industries and Mines, Government of Goa, Daman and Diu again reminded the Chief Controller, about the issue of the said essentiality certificate, while given further information required by the Chief Controller.

6. By their application Dt. 15th March, 1970, made to the Under Secretary, Ministry of Petroleum Chemicals and Mines, and Metals, Department of Mines and Metals, the petitioners specifically mentioned the purpose for which they needed the said machinery. They amongst other things, inter alia, pointed out that the said machinery was required by the petitioners to increase their productivity appreciably, that with the help of the said machine, in their mines, the petitioners desired to remove an overburden in the ratio of 2.2 to 2.3 tonnes of rejection per tonne of ore produced and it was well known that the rapid development of mineral production has been made possible by swinging to 'bulk mechanised mining,' which entailed the maximum utilisation of heavy machinery. They also pointed out that removal or overburden of exposing of the ore bodies, was most efficient, quickest and most economical with the help of mechanical ripping, dozing (supported by steeping shovels and haulage system), provided the ripper machine utilised, developed adequate H.P. to cope up with the rock strength conditions prevailing, which was the standard modern technique adopted in mining all over the world because of its tremendous advantage over drilling and blasting. They also pointed out that drilling and blasting which by comparison was a laborious, slow and expensive process, was adopted only is areas where geological rock formation was found to be top hard for mechanical ripping and was otherwise confined to the barest minimum merely for loosening in isolated pockets of hard strength rock formation, sufficient to enable mechanical rippers to cape. The petitioner in the said application also pointed out that the world market prices for iron ore was having downward trend and as such it was essential for the petitioner to rationalise the production of their ore and removal of overburden to the greatest possible extent in order to keep the cost of production within the economical limits imposed by the international competitive market prices. In Item 7(d) of form E. which the petitioners supplied with their application, they described the purpose of import as 'for mining use, removal of overburden mechanical ripping and dozing.'

7. From the other correspondence, that has been annexed to the petition, one finds that even the proforma application, which the petitioners were required to fill in for the purposes of import of capital goods, they had in Item 10 thereof mentioned the detailed use of the mining equipment sought to imported as :---

'the removal of overburden by mechanical ripping and dozing to expose the ore body utilisation in combination with wheel loaders to mechanically produce iron ore far more expeditiously and efficiently and hence far more economically also.'

8. Further correspondence annexed to the petition indicated in the same manner, wherever necessary, the nature and the purpose of the said machinery.

9. When the said machinery arrived in India, in the Bill of Entry submitted to the petitioners, the petitioners classified the same under Entry No. 72(18) of the Tariff Schedule as ' Mining Machinery' and gave the justification for the same. However, the Customs appraiser classified the same under Item 72(b) of the said Schedule and assessed the duty on the said machinery accordingly. The petitioners, therefore, not agreeing with the same, paid the duty demanded under protest.

10. However, the petitioners by their application Dt. 1-5-1972, applied to the Assistant Collector of Customs for the refund of the excess amount paid by them. At the hearing before the Assistant Collector the petitioners produced all the relevant material including the certificate of the manufactures M/s. Larsen Toubro and Co. Ltd., and four other experts in trade to substantiate their contention that their machinery was 'Mining Machinery' covered under Item 72(18) of the Schedule. The Department, however, did not produce any material or lead any evidence to contradict the petitioners' contention.

11. The Assistant Collector of Customs by his order Dt. 22-7-1972, held that the petitioners' machinery was not 'Mining Machinery' coming under Item 72(18), but was merely earth moving machinery, coming under Item 72(b) of the said Schedule, as being other machinery, not specified. In coming to the said conclusion, the Assistant Collector of Customs dealt with the petitioners' machinery in three parts viz. (i) the main body of the Cater Pillar, Crawler Tractor and the other two being its two attachments viz. Dozer and Ripper. According to him the Dozer, attached to the said machinery, by itself was commonly used for earth moving or earth shifting, while the bulldozer and rippers were not designed for exclusive use in mining Industry. He, therefore, came to a conclusion that the machinery of the type sought to be imported by the petitioners was purely earth shifting and earth moving machines which were often used in construction work, building roads, developing large tracks of land for agriculture and industrial purpose, clearance of woods and that the mere fact that the Crawler Tractors were sought to be imported for the exclusive use of mining industry would not justify its classification as 'Mining Machinery' under the Indian Customs Tariff. He further held that merely because the office of the Import Trade Controller had described the said machinery as 'Mining Machinery' would not make it so. For his said view he relied on the Brussels Tariff Nomenclature and held that the machineries sought to be imported by the petitioners were only vehicles for excavating, levelling, tamping, boring and extracting machinery, stationery or mobile for earth minerals or ores. According to him there was no ambiguity in the expression used in the Indian Customs Tariff.

12. In appeal against the said order, the Appellate Collector of Customs Bombay, by his order Dt. 19-10-72, confirmed the said order of the Assistant Collector of Customs. He rejected the certificates issued by Engineers Bharne and Bharne, classifying the petitioner' machinery as 'Mining Machinery' on the ground that the manufacturers' leaflet did not mention that the equipment was designed 'for exclusive use in Mining'. He also rejected the certificates issued by the Panaji Branch of Manufacturers Larsen Turbo as 'it did not certify that the equipment had been designed for exclusive use in Mining.' According to him it was clear from the evidence produced that the Crawler Tractor with ripping and dozing attachment was primarily earth moving equipment, though it could find use in the mining industry.

13. To the same effect was the order of the Joint Secretary to the Government of India Dt. 4-1-1975, made in revision against the orders of the Appellate Collector of Customs. The joint Secretary also in the said order stated that the petitioners' machinery viz. D-9 Crawler Tractors with bull dozer and ripping attachment were earth moving machineries and were used in various construction works, building roads, reclamation and development of large tracks of land and so on, and that they were also used in mining installation. However, according to him, the petitioners' contention that they were predominantly used as 'Mining Machinery' was not correct, as such equipments were imported by various private importers and Government departments for being used in construction work, land reclamation and development work, etc. He also pointed out that the manufacturers' catalogue did not indicate that such machinery was meant for use in mines only or primarily in mines. According to him Indian Customs Tariff classification was to be determined by its design and not by use to which it was put to by any individual importer.

14. Against the said order this writ petition has been filed. The main controversy was round a narrow question, whether the petitioners' said machinery could be covered under Item 72(18) of the Indian Customs Tariff, or whether it was classified under Item 72(b), applying to machineries, not otherwise specified ?

15. The petitioners' said machinery is called the 'Crawler Tractor' consisting of Caterpillar D-9 Tractor with dozer and ripper attached. It is not disputed that the petitioners imported the same for the mining operations. Under their licence they were required to use the same in their mines and in fact they have been using the same exclusively in their mines. As pointed out by the petitioners in paragraph 3 of their petition the said Crawler Tractors were equipped with hydraulic power dozer model 9-S and hydraulic ripper attachment Model D-9 with their under carriage equipment being built of heavy duty construction and of tough alloy steel to suit operations and extreme service conditions encountered in cross ore mining. The purpose of the use of the said machinery by the petitioner has been aptly described by them in their letter Dt. 15-3-70, to the Under Secretary, Ministry of petroleum (Part of Ex. C Collectively to the petition) as under :---

'The rapid development of mineral production has been made possible by swinging to 'bulk' mechanised mining, which entails the maximum utilisation of heavy machinery. Similarly with the removal of overburden for exposing of the ore-bodies, it is universally accepted especially for open-cast mining, that provided the ore being mined is composed of rippable rocks, the most efficient, quickest and most economical system of removal of such over-burden is by mechanical ripping and dozing (supported by steeping shovels and haulage system) provided the ripper machine utilised, developed adequate H.P. to cope with the rock strength conditions prevailing. This is the standard modern technique adopted in mining all over the world because of its tremendous advantages over drilling and blasting. Drilling and blasting, which by comparison is a laborious, slow and expensive process is adopted only in areas where geological rock formations are found to be too hard for mechanical ripping and is otherwise confined to barest minimum merely for loosening of isolated pockets of hard strength rock formations, sufficient to enable mechanical rippers to cope.'

16. The question was, whether such a machinery by its aforesaid design, nature and purpose could be termed a 'Mining Machinery' ?

17. The term 'Mining Machinery' has not been defined in the Act, with the result, that this question will have to be considered in two different aspects. Firstly, whether it was possible to hold that by its nature such a machinery could be put in the category of 'Mining Machinery' and if not, in the absence of technical or scientific test, how the people in trade and commerce, conversant with the subject, understand it in usual course.

18. The scope of the words 'Mining Machinery' used in Item 72(18) of the said Indian Customs Tariff came to be considered by this Court in its unreported decision in Appeal No. 74 of 1976, in the case of (M/s. V.S. Salgaonkar and Brothers Pvt. Ltd. v. S.B. Patil and others, decided on 16th February, 1981. In that case the question was whether the 'Dumpers' imported by the petitioners were 'Mining Machinery' The Court there took the view that Dumpers were purely mechanical conveyances used for carrying ore from shafts at the mines to the stacking places and, therefore, not a 'Mining Machinery'. However, while dealing with the meaning of the term 'Mining Machinery' in Item 72(18) the Court after referring to various items mentioned in Chapter VI of the Customs Tariff Act in which the Item 72(18) 'Mining Machinery' appeared, sought to define the said term 'Mining Machinery' as under :---

'The item 'Mining Machinery' under Item 72(18), therefore, would have to be considered as machinery as such used for mining and anything that would be an intrinsic part of such machinery could only be considered as mining machinery.'

19. This Court also in para 19 of the judgment, after referring to certain Chapters in Kempes Engineering Year-Book for 1975, (80th Edition) pointed out :---

'.........looking to the above factors, particularly, to the classification of various types of machines according to their purpose under Chapter XVI of the Act which includes 'Mining Machinery' has to be given a restricted meaning so as to mean that machine which is used essentially and intrinsically for the operation of or in the process of mining or excavating ore from the mine.'

The Court in para 25 of the said judgment again reiterated :---

'As pointed out above, in our view, the meaning to be given to the term 'Mining Machinery' has to be restricted only to that machinery which is mining machinery, as such, or which was required to be and can be considered to form an integral part of such machinery, specifically used for the purpose of or in the process of mining, i.e. excavating ore from the mine. It is true that for that purpose it may not be necessary to show that any such machinery was being exclusively used for the mining purpose, as suggested by the Appellate Collector in his order.'

20. On the said observations of this Court as regards the definition of the 'Mining Machinery' we may now consider the nature of the petitioners' machinery viz. Crawler Tractor.

21. In this case, for mining the ore, the petitioners have adopted 'an open cast' method of mining, in order to reach the mining bed, which is below the surface of earth, for the purpose of actual mining of ore, it was necessary to rip into the upper surface of the earth and to remove what was known as overburden. The object of the Crawler Tractor with the attachment of Dozer and Ripper attached to it was for bulk mechanised mining instead of drilling and blasting, which was earlier used. It goes without saying that mining bed could never be reached or no mining in open cast method could ever be performed unless and until the upper layer of the earth over the mining bed had been ripped open and removed. If that were so, then ripping of the earth to reach the mining bed and removing the overburden, before commencing the mining operation, was intrinsically connected with and was the integral part of the mining operation. The said two things could not be separated for carrying out the mining operations. Therefore, on the basis of the aforesaid definition of 'Mining Machinery', in our view, the said machinery used by the petitioners exclusively for ripping open the land and removing overburden for reaching the mining bed, was used by the petitioners intrinsically and essentially in the process of mining and, therefore, the same would fall within Item 72(18) of the Tariff Schedule, as the 'Mining Machinery'.

22. All the three orders viz by the Assistant Collector, Appellate Collector of Customs in Appeal and of the Joint Secretary of the Government of India in revision, appear to have applied the test of 'exclusive use'. All of them appear to have taken the view, without admittedly there being any material for it, that the said machinery not being designed for exclusive use in mining industry and also as it could be used for construction work, building of roads, developing large tracks of land, etc., it was not a 'Mining Machinery'. As pointed out above, this Court in its afore-cited judgment had in terms negatived the theory of 'exclusive use' and, therefore, the orders of the said authorities based on the theory of exclusive use cannot be accepted.

23. However, if it were not otherwise possible to classify the petitioners' machinery under any particular entry, then since there was no definition of the term 'Mining Machinery', the question could be determined by finding out as to how people in trade or business of mining, as that of the petitioners conversant with the subject, generally treated or understood the same in usual course. See Dunlop India Ltd. v. Union of India, A.I.R. 1977 S.C. 597.

24. In this case, as pointed out above, even at the hearing before the Assistant Collector of Customs, apart from the certificates from the Panaji agents of the manufacturers M/s. Larsen Toubro and engineers M/s. Bharne and Bharne, the petitioners had also produced certificates from three other persons who were admittedly in mining trade and conversant with the machinery of the type imported by the petitioners. Of the said three certificates one was by one Modu Timblo, President of Goa Mineral Ore Exporters Association, the second was by one Mallya, Vice-President of said Association and the third one was by one Talaulikar, President of the Goa Mining Association. All the said three persons in their certificates had unequivocally stated that the petitioners' said machinery was regarded and considered basically as mining machinery in the Mining Industry as also according to the general trade and usage.

25. The department had produced no material either by documents or by evidence of experts to show to the contrary. Strangely enough, neither the Assistant Collector nor the Joint Secretary to the Government of India did even refer to these certificates while the Appellate Collector of Customs discarded them as not mentioning that the equipment was designed for exclusive use in mining.

26. In our view, in the absence of any material to the contrary being produced by the Department, the said view expressed in the certificates by the said three persons who were admittedly people in trade of mining and conversant with the said machinery generally had gone uncontradicted and deserved to be accepted as showing that the petitioners' said machinery was considered in Mining Industry as basic 'Mining Machinery' and also considered to be so according to the general trade usage.

27. In our view, therefore, in either view of the matter the petitioners' said machinery 'Crawler Tractor' would be classified as 'Mining Machinery' falling under Item 72(18) of the Customs Tariff Schedule and the order of the lower authorities, therefore, cannot be sustained.

28. The result, therefore, is that the Rule in the petition is made absolute in terms of prayers (a) and (b) of the petition.

29. Respondents to pay petitioners costs of the petition.


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