2022 (6) TMI 928 - AT - Customs

Tribunal remands case on vessel classification, overturns value enhancement & revokes penalties.

Sachin Kshirsagar, SS Offshore Private Ltd, Babaji Shivgram Clearing & Carriers Pvt Ltd and Harish Bhatia Versus Commissioner of Customs (Import-I), Mumbai

Sachin Kshirsagar, SS Offshore Private Ltd, Babaji Shivgram Clearing & Carriers Pvt Ltd and Harish Bhatia Versus Commissioner of Customs (Import-I), ... Issues Involved:1. Classification and valuation of the imported vessel.2. Inclusion of freight, insurance, and other charges in the assessable value.3. Imposition of penalties under sections 112 and 114AA of the Customs Act, 1962.Issue-wise Detailed Analysis:1. Classification and Valuation of the Imported Vessel:The dispute centered around the classification and valuation of the 'old and used self-propelled platform supply vessel Sagar Fortune.' The customs authorities reclassified the vessel under tariff item 8905 9090, arguing it was designed for firefighting and support, not merely for supply, as claimed by the importer. The authorities relied on various certificates, including the 'class certificate' issued by American Bureau of Shipping (ABS) and Indian Register of Shipping, which described the vessel as an 'Offshore Support Vessel' with firefighting capabilities. Consequently, the exemption from basic customs duty was denied, and the assessable value was enhanced from US $ 2,100,000 to US $ 5,000,000.The Tribunal found that the customs authorities had not adhered to the instructions pertaining to estimation by Chartered Engineers and had improperly relied on the second Chartered Engineer's report without allowing cross-examination. The Tribunal set aside the enhancement of the vessel's value, emphasizing that the declared value should be the 'gold standard' unless contrary evidence is presented.2. Inclusion of Freight, Insurance, and Other Charges in the Assessable Value:The customs authorities included several charges paid by the importer prior to the vessel's arrival in India in the assessable value. The appellant argued that these charges should not be included as they were not payable to the seller. The Tribunal noted that the vessel, being a 'conveyance,' does not take on additional insurance or incur transportation costs for registration purposes. Therefore, the inclusion of freight and insurance in the assessable value was deemed inappropriate, and the enhancement of the assessable value was set aside.3. Imposition of Penalties:The Tribunal addressed the penalties imposed under sections 112 and 114AA of the Customs Act, 1962. It found that the misdeclaration of stores and bunkers did not involve the individuals in question, and the claim for exemption was not indicative of intent to evade duty. Consequently, the penalties imposed on the individuals were set aside.Conclusion:The Tribunal remanded the matter back to the original authority for a fresh decision on the classification of the vessel, specifically between headings 8905 and 8906 of the First Schedule to the Customs Tariff Act, 1975. The enhancement of the vessel's value was set aside, and the penalties imposed on the individuals were annulled. The appeals were disposed of with the limited remit of deciding the appropriate classification in the remand proceedings.