TaxTMI 
TaxTMI 
2016 (7) TMI 645
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....n to evade huge amount of duty; investigations were initiated by the officers of SIIB of Customs. The preliminary investigation revealed that M/s. L&T Sapura Shipping filed B/E No.2003235 dated 02.12.2010 in respect of MV LTS 3000describing the vessel as One unit self propelled Ship LTS 3000 with essential spares accessories, cons and provisions. The invoice No. IN/LTD3000/005 dated 12.11.2010 however showed the description as M.V. LTS 3000 IMO Number 9446843 Type : Heavy Lift Pipe lay Vessel. The vessel was examined on first check basis and the Group Appraiser objected to the classification and directed the importer to classify the vessel under CTH 89 05. Thereafter the CHA vide letter dated 15.12.2010 requested to amend the description from permanent import of one unit self propelled ship LTS 3000 with essential spares accessories cons and provisions to MV LTS3000 IMO No.9446843, Built 2010, Indonesia, Type Heavy Lift Pipe Lay Vessel GT-30628T NT-9188T (Temporary import on re-export basis) along with some additional quantity of various fuel and consumables. The request was allowed. 4. Pending investigation in the matter Appellant filed a writ petition before the Honble Bo....
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..... ONGC Ltd. And M/s. L&TSSPL, the importer is only a vessel owning company. It is evident from the above conditions that the importer has to be the sub-contractor of licensee. In view of these conditions other than the licensee or Sub-Contractor of the licensee (M/s. ONGC Ltd.) no importer can avail the benefit of duty exemption on the strength of Essentiality certificate. The importer M/s. L&TSSPL is not a bonafide sub-contractor of M/s. ONGC Ltd,. Therefore, benefit of notification 21/2002-Cus Sl. No. 214 is not eligible to m/s. L&TSSPL as they did not fulfill condition 29 of the said notification. 6. The Appellant L&T SSPL have interalia made the following submissions in their grounds of Appeal: (i) The Hon'ble Bombay high Court in the matter of WP No.2959 of 2011 in para 9 of its order dated 21.04.2011 while granting provisional release of the said vessel expressly stated that for the purpose of Customs Act what is relevant is whether the vessel is essential for the petroleum project and it is not relevant as to who is the contractor executing the work on behalf of ONGC. The said vessel was used for petroleum operations. 7. All the appellants contested the ....
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.... of Hydrocarbon, certifying that the goods are required for petroleum operations which is fulfilled by the appellant (as can be seen from the certificate issued at Page 114 of the Appeal); (ii) Affidavit from ONGC that the sub-contractor is their bona fide sub-contractor (evident from the affidavit at Page 382 of the Appeal); and (iii) Undertaking from ONGC that in case conditions of notification were not complied by sub-contractor then duty, fine or penalty that may become payable ONGC (which is satisfied by the undertaking as annexed at Page 383 of the Appeal.) 9.2. It is his submission that all the conditions pertaining to benefit of notification were satisfied by the appellant and hence the denial of benefit of notification exempting the said vessel from the payment of customs duty is wrong. It is his submission that the vessel is undisputedly used to carry out offshore petroleum operation by the appellant as sub-contractor of L&T Ltd. He would then draw our attention to the meaning of the sub-contractor in Blacks Law Dictionary and model contract published by Government under New Exploration Licensing Policy (NELP) program and in Advanced Law Lexi....
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....oved by ONGC for their installation activity; that Appellant, being a sub-contractor of L&T was treated as sub-contractor of L&T was treated as a sub-contractor of ONGC by implication and conduct on the part of ONGC. It is also his submission that its general practice of ONGC, the DGH and the Customs Department, to treat sub-contractor of a sub-contractor as a sub-contractor of the main contractor and thus, exemption is routinely extended. 9.4. It is his submission that the appellant has complied with the conditions of notification, as the main ground of the revenue that the Essentiality Certificate of DGH cancelled, is no more available as it is struck down by the High Court of Bombay. It is his further submission that the CBEC by circular no. 21/2013-Cus dated 16.5.2013 on the same issue clarified that for the extension of the benefit of notification, non-mentioning of the name of the contractor in the agreement cannot be a ground for denying the benefit of exemption and should be allowed based on the Essentiality Certificate issued by the DGH. He would submit that the Adjudicating Authority has not considered this direction of CBEC in its correct prospective and it is settled....
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..... Notation IY is assigned to self-propelled seagoing crafts. He also drew our attention to the registration of the shipping by the Indian Registrar of Shipping for Cargo Ship certificate has classified LTS 3000 as cargo ship other than any of the above. He would submit that all these things indicate LTS 3000 is an Ocean Going Vessel and a Cargo ship and hence merits classification under CTH 8901 or 8906 but not under 8905. For this proposition he relied upon the judgment of the Tribunal in the following cases: * HAL Offshore Ltd. - 2014 (303) ELT 119; * J.M.Baxi & Co. 2015 (318) ELT 688; and * CGU Logistic Ltd. v. Commissioner - 2011 (274) E.L.T. 75 9.8. As regards the claim for classification under 8906, he submits that the said entry specifically covers cable ships for laying under water cables; that it is undisputed that LTS3000 is a pipe laying ship for laying pipes under water. He would submit that the classification of the ship is accepted 8901 and 8906 they carry nil rate of duty and entire demand needs to be set aside. As regards the penalty imposed, he submits that the entire issue is of interpretation, hence penalties imposed are unwarrante....
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....fter taking us through the findings recorded by the Adjudicating Authority and also taking us through the records, grounds of appeal taken by the appellant submits that in this case four parties are involved:- (i) M/s ONGC Licencee (ii) M/s L&T contractor for the project. (iii) M/s L&T Sapura Off Shore Pvt Ltd ( claimed sub contractor) (iv) M/s L&T Sapura Shipping Pvt. Ltd. owner and importer of the goods. He would submit that L&T Sapura Shipping Pvt. Ltd, the main appellant has claimed import of the goods under Sl. No.214 of Notification No.21/2002-Cus as amended at nil rate of duty claiming that the vessel is required in connection with petroleum operations undertaken under petroleum exploration licenses or mining leases given to ONGC. It is his submission that the benefit is subject to fulfillment of condition laid down at sl. no. 29 and the Appellant who has imported goods is neither contractor nor sub-contractor of the licensee. He would submit that Shri Sachin Sain, General Manager, (Projects) of ONGC in his statement recorded stated that the ONGC Ltd. was not aware in advance that M/s. L & T Ltd. is sub-contracting the job to M/s. L &....
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....various appellants, he reiterates the finding of the Adjudicating Authority. 12. We have considered the submissions at length by both sides and perused the records. 13. On consideration of the submissions made by both sides and perusal of the records, the following issues needs to be decided by us: i) Whether the impugned vessel i.e. LTS 3000 is classifiable under CTH 8901 or 8906 as claimed by the main appellant or 8905 as held by the Adjudicating Authority. ii) Whether the main appellant is eligible for benefit of Notification 21/02-Cus at Sr.no.214. 13.1. Benefit of Notification 21/02-Cus The Adjudicating Authority has held that the main appellant is not eligible to avail the benefit of Notification 21/02-Cus (sr.no. 214) on the ground that the main appellant is not a sub-contractor and is only an importer and various statements recorded of the officials of ONGC indicate that appointment of main appellant as sub-contractor was in accordance with the agreement entered by ONGC with L&T Ltd. 13.2. We find that the Adjudicating Authority has totally misdirected his finding on this point after misconstruing the facts. In order to appreciate the correc....
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.... obligation under the Contract dated 16th October, 2009. Further, in the application besides listing the vessel LTS 3000 in respect of which essentiality certificate was requested, the sub-contractors name was shown as L&T Ltd. while the importers name was shown as L&T Sapura Shipping P. Ltd. This was on the basis that the contractor viz. 1st petitioner i.e. M/s. Larsen & Toubro is the person who is over all in charge in executing the contract and had engaged the services of 2nd petitioner viz. L&T Sapura Shipping P. Ltd. as its agents for importing the vessel viz. LTS 3000 for the purposes of execution of the contract. This understanding is also fortified/ supported by the affidavit submitted to the Dy. Commissioner of Custom wherein also it was stated that L&T Ltd. i.e. 1st petitioner is our contractor for the MHN process platform and Living Quarter project." (As reproduced from affidavit at page 384 onwards at page 394 & 395 of the appeal memorandum) 13.3. From the above reproduced portion of the affidavit filed by the responsible officer of ONGC before the High Court in a writ petition connected to the issue in hand, would indicate that ONGC had always consi....
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....notification is on records accepted as correct certificate. 13.5. The second requirement of the condition of notification is that an affidavit has to be filed by ONGC to the effect that the sub-contractor is bona fide sub-contractor of the licensee of the lessee. It is to be seen that ONGC has filed an affidavit dated 19.10.2010 to Dy. Commissioner of Customs, Mumbai regarding that the main appellant is sub-contractor of L&T Ltd. in terms of condition no. 29 of the notification, scanned copy of the same is reproduced: The above said affidavit was accepted by the department while extending the benefit of notification but subsequently contradicted on the ground that the said affidavit was incorrect as it is not being in consonance with the clauses of agreement entered by the ONGC with L&T. It is the finding that as per clause 5.2.2. various conditions needs to be fulfilled for accepting the main appellant as the sub-contractor. We fail to understand the finding recorded by the Adjudicating Authority and as also canvassed by the ld. Special counsel on this point. ONGC in pursuance to the contract entered by them with L&T has accepted the proposal that the main appellant herein i....
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....cord that none of the conditions of the said notification are contravened or violated by the main appellant. Assuming that there is nothing on record to indicate, as such, even if there is a violation of condition of notification, the customs duty liability gets fastened on ONGC and not the main appellant. 13.7. Be that as it may, there is no dispute as to the fact that the vessel LTS 3000 was used only for the petroleum operations as per the contract awarded to L&T. The exemption granted by the notification is to be extended to the goods to be used in connection with petroleum operations under petroleum exploration licence which is undisputedly complied with by the imported vessel LTS 3000. We find strong force in the submission made by the counsel that the terms contractor and sub-contractor have not been defined under Customs Act, nor in the notification or any other statute, in such a situation the meaning needs to be looked into the various dictionaries. On reading the definition of sub-contractor in Black's Law Dictionary, which reads as a sub-contractor is one who is awarded a portion of an existing contract by a contractor in the case in hand the appellant is sub-contrac....
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....he original contract. 2.4.3 It is, therefore, clarified that non-mention of the name of sub-contractor in the agreement signed between the contractor and GOI cannot be a ground for denying the benefit of the exemption and that the exemption should be allowed based on the EC issued by the DG, Hydrocarbons. 3. The above position may be brought to the notice of formations under your charge. Difficulties, if any, faced in the implementation of the instructions may be brought to the notice of the Ministry at an early date." CBEC in the above said clarification has specifically stated that non-mentioning the name of the sub-contractor in the agreement cannot be a ground for denying the benefit of exemption and same should be allowed based on the Essentiality Certificate issued by DGH. The case in hand the CBEC squarely covers the issue in favour of the main appellant. The Adjudicating Authority has erred in not following the direction of CBEC when the facts are so very clear in the case in hand. 14. Classification The Adjudicating Authority has decided the classification of the vessel LTS 3000 under 8905. While the appellant has claimed the 8901 or 8906. In ord....
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....nature of vessel LTS 3000 is not at all disputed by any of the lower authorities. 15. In our view the classification of the vessel LTS 3000 under 8905 by the revenue authorities is totally incorrect. We are fortified in our view by the judgment of this Tribunal in HAL Offshore Ltd. (supra) and J.M.Baxi & Co. (supra). We reproduce the relevant paras from the decision of J.M.Baxi & Co. "4.1 The competing? entries of classification are CTH 8905 and CTH 8906 and they are reproduced below :- Tariff item Description of goods 8905 Light-vessels, fire-floats, dredgers, floating cranes, and other vessels the navigability of which is subsidiary to their main function; floating docks; floating or submersible drilling or production platforms. 8905 10 00 - Dredgers 8905 20 00 - Floating or submersible drilling or production platforms 8905 90 - Other : 8905 90 10 - Floating docks 8905 90 90 - Other 8906 Other vessels, including warships and lifeboats other than rowing boats 8906 10 00 - Warships 8906 90 00 - Other 4.2 According to? HSN Explanatory Notes, heading 8905 covers vessel which perform their main function i....
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.... not find any rational basis for this argument. The purpose of any scientific survey is to gather reliable data and from the analysis of the data, scientifically valid conclusions can be drawn. Thus collection of data is an integral part of any empirical scientific research and cannot be treated as a separate or distinct activity." The relevant paras from HAL Offshore Ltd.:- "7.9 Now let us see whether there is any merit in the? Revenues case for classifying these vessels under CTH 8905. The said heading covers light vessels, fire floats, dredgers, floating cranes, and other vessels the navigability of which is subsidiary to their main function; floating docks; floating or submersible drilling or production platforms. The types of vessels specified in this heading are essentially stationary vessels and they do not have any navigational capability. Even when they have such capability, the same is subsidiary to their main function. From the class certificates issued by the Indian Registry and Bureaus Veritas, it is seen that the vessels are SUPPLY VESSELS with unrestricted navigation. In other words, navigation is not subsidiary to their main function. The safety certi....
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....of a vessel in a specific heading. The question of classifying the vessel in this case under 8905 does not arise. We are fortified in this view by the HSN explanatory notes to chapter 8905, which states that the vessels covered under this heading normally function or perform other main function in a stationary position. In the case in hand, it is admitted fact that the vessel is continuously moving while laying the pipes and undertaking any operation in relation to the petroleum exploration. 16. We also note that the HSN explanatory notes can be relied upon to come to a correct classification is a settled law. A plain reading of inclusions of the vessel in chapter heading 8905 would mean that the vessel should be undertaking or performing function in a stationary position, which in the case in hand is absent. We find that the HSN explanatory notes 8906 has indicated that cable ships, laying underwater cables for telecommunication are covered under CTH 8906. In the case in hand the vessel LTS 3000 is laying under water pipes which may not be of laying of underwater cables but definitely laying the pipes under water on the ocean bed is an activity undertaken. In our considered vie....