TaxTMI 
TaxTMI 
2018 (11) TMI 243
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....er notification No 12/2012-Cus dated 17.03.2012 (Sr No 461) and Notification No 21/2012-Cus dtd 17.03.2012 is ordered to be denied to the vessel imported under the above mentioned Bill of Entry filed by the noticee at Jaigad Port under Ratnagiri Customs Division. iii. Bill of Entry No 006/JGD/12-13 dtd 15.04.2013, filled by the noticee with Ratnagiri Customs Division is ordered to be re-assessed to appropriate duty of Customs by re-classifying the said vessel under Chapter Sub Heading 89059090 of the Customs Tariff Act, 1975. iv. Subsequent to re-assessment, I confirm the Customs duty amounting to Rs. 12,43,46,232/- (Rupees Twelve Crore Forty Three Lakh Forty six Thousand Two Hundred and Thirty Two only) as payable on the import of the vessel, M V Royal sesa. By mis declaring and misclassifying the same as "Self Propelled and Navigable transhipment Cargo Barge" under the provisions of Section 28(4) of the Customs Act, 1962. v. I order to appropriate the amount of Rs. 12,43,46,232/- (Rupees Twelve Crore Forty Three Lakh Forty six Thousand Two Hundred and Thirty Two only) paid by the noticee vide Challan No 001 dtd 04.04.14 towards the above liability. vi. I confirm the inter....
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.... No SGL for Construction of Floating Transfer Station 11-12 dated 21st May 2011; ii. Project Management Contract with M/s VIKSandvik Design India, bearing contract No FTS/ Project Management/ SCL/ 11-12 dated 18.05.2011; iii. Ship Design Contract with M/s wartsila Ship Design Singapore Pte Ltd., bearing No SGL/ FTS Design/ 1/12 dated 12.04.2011; iv. Commercial Invoice No Chengxi 2011-FTS 25- 01 dated 27th August 2012 raised by M/s Chengxi Shipyard Co Ltd., China; v. Bill of entry No 006/JGD/12-13 dated 15.04.2013; vi. Builder's Certificate of Vessel; vii. Certificate of Indian Register of Shipping (IRS) - Certificate of Class No 14067 dated 18.02.2014; viii. Transshipment Permit No 01/2013 dated 21.03.2013; ix. The declaration Form (annexure-1) submitted by appellants to Ratnagiri Customs show description of goods as "Transshipmet Cargo Barge"; x. The certificate of Tuvalu Ship Registry issued at Singapore on 26.12.2012 shows the type of vessel as "transshipment Cargo Barge"; xi. The Cargo ship Safety Radio Certificate, dated 07.04.2013 issued by American Bureau of Shipping showed vessel as a transshipment vessel operating within 20NM from the nearest coast of India; xii....
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....ifiable under heading 89019000 as claimed by them, in comparison to 89059090 which covers "Other vessels, the navigability of which is subsidiary to their main function." Since navigability is one of the key function of the vessel without which it would not be able to perform other function, heading 8905 would not be applicable in their case; ii. Impugned vessel would be correctly classifiable under heading 8901 by application of general Rules of Interpretation. iii. As per HSN explanatory notes for the headings 8901 and 8905, heading 8905 encompassed those floating structures which were capable of navigability, but which normally performed their functions in stationary position. The vessel under consideration has to navigate along the length of the recipient vessel, without which the functional requirements could not be achieved. Since in the present case navigability is a critical factor for functionality the same cannot be said to be subsidiary for classifying this vessel under heading 8905. iv. Design is determinative factor for the purpose of classification v. They relied on certificate issued by various authorities as follows in their support- a. International Load Line....
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.... (T-Mum)] x. They relied upon the authorities as follows in their support- a. Hal Offshore Ltd Vs CC Import [2014 (303) ELT 119 (T)] b. Hede Ferrominas Pvt ltd [TS-7098-CESTAT- 2015-CUST] c. Raj Shipping Agencies Ltd [2015-TIOL-1405- CESTAT-MUM] d. J M Baxi & Co & Other [Appeal No C/86330 to 86332, 86724 to 86726, 87210/13-Mum] e. Prince Marine Transport Services Pvt Ltd & Another [Appeals Nos C/86323 & 86324/2013] f. L & T Sapura Shipping Pvt Ltd [2016-TIOL- 1519-CESTAT-MUM] g. Pharm Aromatic Chemicals [1997 (95) ELT 203 (Bom)] h. Faqir Chand Gulati vs Uppal Agencies Private Limited [2008 (12)STR 401 (SC)] xi. Accordingly the vessel MV Royal Sesa merits classification under Chapter Heading 8901. 3.3 Arguing for the revenue Learned Authorized Representative submitted, that i. From the various documents in relation to procurement, construction and export of the said vessel, it is quite evident that the vessel imported was not a transshipment cargo barge as claimed by the Appellants but was a floating crane. He relied upon the decisions as follows in his support to hold that based on the design features and actual functional capabilities of the vessel the correct ....
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.... given out of charge on 15.4.2013. iii. Investigations in the import of said vessel and the investigations broadly revealed that : (i) the importer floated RFP 'for the construction and supply of floating crane'. All the contracts entered by the importer with ship builder, the ship designer and Project Management service provider described the vessel to be constructed as Floating Transfer Station / Floating Transhipment Station for the purpose of carrying out loading of cargo in the open sea. (ii) The vessel constructed by M/s. Chenxi China was basically a pontoon fitted with two cranes and full fledged material handling conveyor system for handling ( loading and unloading operations) of bulk cargo in the open sea for the barges to the ocean going vessels or vice versa. (iii) It does not have any cargo hold or cargo hatch but was having only a funnel shaped 'cargo coaming' to primarily serve as buffer storage required for trimming and topping operation in the loading of the vessel or to hold cargo and use it to continue loading/ unloading when the barges laden with cargo are not available alongside.. (iv) The vessel is not designed as a vessel for cargo transportation nor ....
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....s of the said investigations department held the view that correct classification of the vessel will be under heading 89059090 and the benefit of exemption under the notifications claimed by the appellant will not be available to them. (v) Actual picture of the vessel is reproduced below: From the above picture it is evident that the vessel is not a normal passenger or cargo vessel but has been designed and fitted with number of equipments for performing specific functions for which the vessel has been designed. 4.2 For ease of reference Chapter 89 of the CTH is reproduced below: CHAPTER 89 Ships, boats and floating structures NOTE : A hull, an unfinished or incomplete vessel, assembled, unassembled, or disassembled, or a complete vessel unassembled or disassembled, is to be classified in heading 8906 if it does not have the essential character of a vessel of a particular kind. 8901 CRUISE SHIPS, EXCURSION BOATS, FERRY-BOATS, CARGO SHIPS, BARGES AND SIMILAR VESSELS FOR THE TRANSPORT OF PERSONS OR GOODS 890110 - Cruise ships, excursion boats and similar vessels principally designed for the transport of persons; ferryboats of all kinds : 89011010 --- Ships 890....
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.... of the vessel and the equipments fitted onto the vessel to perform a specialized task. However the classification of the vessels cannot be determined on the basis of that criteria. Classification of any vessel is based on its essential character ascertained on the basis of the functional features, structural design and the equipment fitted on board the vessel. It is the basic design keeping in view the function that is intended to be performed which determine the classification of the particular vessel. In this regard reliance is placed on the following judgments: a. Urmila & Co. Pvt. Ltd. [1998(104) ELT-97(Trib.)] b. L.M.P.Precision Eng.Co.Ltd.[2004(163)ELT 290(SC)] c. Mahindra & Mahindra Ltd. [2013(296)ELT 485(Tri-Bang)] 4.4 The description of the heading CTH 8905 categorically states that the navigability is subsidiary to their main function The phrase "the navigability of which is subsidiary to their main function" has been explained in the HSN in the following manner: "These normally perform their main function in a stationary position they include light vessels, drill ships, fire floats, dredgers of all kinds (e.g.) grab or suction dredgers, salvage ships for the recove....
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....ge. Even Export Cargo Manifest of Chengxi Shipyard Co. referred to the vessel as "Crane Barge" when it was cleared for transportation of vessel 'Super Servant 3' on 18.10.12. Documents are reproduced below: It is not in dispute that under the HSN Explanatory Notes crane barge / floating cranes are classifiable under Chapter 8905 of HSN 4.8 Hon'ble Supreme Court in the case (i) M/s. O.K. Play(India) Ltd. Vs. Commissioner of C.Ex., Delhi-III, Gurgaon [2005 (180) ELT (300) (SC)}, held that no one single universal test can be applied for correct classification. Further, HSN along with the explanatory note provide the safe guide for interpretation of an entry. Hon'ble Supreme Court also held that functional utility, design, shape and pre dominant usage have also got to be taken into account while determining the classification on an item. When all the above observations are taken into account, it is seen that the vessel imported was fitted with cranes, and cranes provided the pre dominant usage and functional basis to the vessel. 4.9 The appellants have also sought to rely on the fact that vessel has self-navigation facility as well as capacity to transport persons. These submission....
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....l in question is akin to a house boat in the sense that it performs function by accommodating personnel in a stationary position near oil rigs/platforms in the sea. 7.The argument that similar vessel 'Vasuda' imported by M/s. Hind Offshore Ltd. was classified under CTH 89.01 cannot lead to the conclusion that the present vessel should also be so classified for the reason that the Customs authorities are not estopped from taking a different view. There is no estoppel in fiscal statutes. 8.The reliance placed by the appellants on the judgments of the Apex Court in UOI v. V.M. Salgaoncar & Bros. (P) Ltd. [1998 (99) E.L.T. 3 (S.C.)] is misplaced as that decision is distinguishable from the facts of the present case. That case dealt with the issue of liability to examine in relation to capability of vessel sailing in the ocean and sea and the issue did not relate to classification which as we have seen from the scheme of Chapter 89, is on the basis of primary function. 9.In the light of our finding that the primary function of the vessel is that of accommodation of personnel and its navigability is subsidiary to the above function, we agree with the authorities below that it right....
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....ent are also not seen discussed in the orders of the lower authorities. Both the orders were accepted by the Revenue. 9. That the vessel in question is used as a transhipment vessel transhipping cargo in all the aforesaid modes is not in dispute. That it is an ocean-going vessel as per the judgment of the Hon'ble Supreme Court is also a fact accepted by the Revenue. The various documents produced by the appellant described the vessel as "cargo ship", "general cargo ship", "transhipper" etc. The certificates issued by the Mercantile Marine Department are also significant in this regard. 'Cargo ship' is specifically classified under Heading 8901 irrespective of the extent or degree of its navigability. The HSN Note under Heading 89.01 says that this Heading covers all vessels for the transport of persons or goods other than vessels of Heading 89.03 and life boats, troop ships and hospital ships of Heading 89.06. HSN Heading 89.01 also includes cargo vessels of all kinds (other than tankers and refrigerated vessels) whether or not specialised for the transport of specific goods. The HSN Note proceeds to say that "these include ore vessels and other bulk carriers (for the transport o....
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.... the vessel was self-propelled and could navigate on its own. In an annexure to the said letter, the full description of the vessel was furnished, wherein dry cargo (coal, iron ore etc.) and agricultural products were specified to be the intended cargo and the purpose of design of the vessel was stated thus : "The vessel shall be designed for short trade (about 20 miles from shore) for discharging of dry bulk commodities from bulk-carriers having maximum air draft 18 metres and maximum 45 metres beam and discharging into small barges through a dedicated conveyor system."" The facts of the said case are clearly distinguishable from the facts in present case further in para 8 of the said decision tribunal found incoherent stands taken by the adjudicating authority. The said case decided the issue on the facts as placed before it holding the vessel under consideration was nothing but a cargo vessel. 4.13 In case of Hal Offshore Ltd., relied upon by the appellants, the facts as recorded in the said case are as follows: "3.Intelligence gathered by the Officers of the Central Intelligence Unit of the Custom House suggested that there has been gross-misdeclaration by both the importe....
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....he main functions. (6) The contract with the ONGC reveals that ONGC uses the terms Multi-purpose Support Vessel to mean a vessel which is capable of multi-purpose functions like fire-fighting, diving support, helicopter operation, rescue operations and pollution control operations etc. and because of these functionalities, MSV is different from ordinary Supply Vessel. (7) The importers had suppressed the information regarding the contracts entered into by them with the ONGC at the time of import of the vessels, thereby suppressing the functionality of the vessel to evade customs duty by misclassifying them as supply vessels instead of multi-purpose vessels where the navigability is subsidiary to the main function of the vessel. (8) In the case of M/s. HAL Offshore, there is an additional allegation that the importer had misdeclared the value of the vessel under importation by not including the cost of modification and saturation diving system totally worth US $ 8.4 million. 4.On the basis of the investigation conducted and evidences unearthed, show cause notices were issued to the appellant vide notices dated 21-5-2010 (HAL Offshore) and notice dated 25-6-2010 (Great Offsho....
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....g as tug-cum-supply vesselcum- anchor handling vessel. For performing these functions, navigation was primary and not secondary or subsidiary. The design and construction of the hull and the vessel was made keeping the navigation of the vessel as a primary function. After acquisition, the design and construction did not undergo any substantial change and the navigation aspect continued to be a primary function. (5) Supply of cargo and crew is also one of the functions to be performed by the vessels as per the scope of work prescribed in the contracts with the ONGC. The contract specifically requires the appellants to carry out transportation of material and equipment as and when required. The fact that in terms of the contract, the vessel has to be operated in a particular manner cannot discriminate the classification of the imported vessel. (6) In addition to the transportation of cargo and personnel, the vessels would also be required for carrying on repairs and maintenance, inspection, rescue support, etc. at the ONGC platforms. The ONGC platforms at Bombay High are spread over a large area and therefore, without navigation, the vessels will be unable to perform most the req....
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....vessel as floating crane then how can the appellants claim the vessel to be different from the said declaration? 4.15 So far as change in the nomenclature from Floating Transfer Station to Crane Barge is concerned, various emails, discussions etc recovered during the course of investigation, regarding the classification, application for license under EPCG, decision not applying for the same and the consequential directions for the CHA's to change the description to "Cargo Barge" show that appellants had knowingly adopted the description to suit their convenience and classify the goods under heading 8901 so that they can avail the benefit of exemption. It was part of a well thought out strategy to evade duty of Customs. 4.16 In view of discussions as above we are of the view that the vessel M V Royal Sesa imported vide B/E No 006/JGD/12-13 dated 15.04.2013 is correctly classifiable under heading 89059090 and benefit of exemptions claimed is not admissible to them. 5.0 Appellant contended that there was no suppression or mis- statement and hence invoking extended period of limitation is not justified. The Adjudicating Authority has in Para 23.4 of his order recorded that- i. The ....
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....ve in a straight forward manner, described the goods by their known commercial name as nuts. In not doing so, and in calling them end fittings, which appellants have not shown is an accepted commercial description, the intention could only be to suppress information about the correct nature and description of the goods from the department with a view to avoid proper classification and evade payment of duty at the correct rate. Clearly, there was mis-description of the goods showing mala fides on the part of the appellants." viii. Since the appellant had suppressed the actual description and mis-represented the vessel as transshipment cargo barge, classifiable under CTH 89-01, the same amounted to misdeclaration for the purpose of section 111(m), Hon'ble CESTAT, Mumbai, in the case Multimetal Ltd. - [2002 (144) ELT 574 (T-Mum)]. (maintained by Hon'ble Supreme Court [2003(151) ELT A-309(SC).]) held as follows: ix. "9.The presence of prime material in the consignments having been confirmed, they become liable for confiscation under clause (m) of Section 111 of the Act. The contention that there were no mala fides is of no relevance in coming to this conclusion. Whether mala fide is....
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....porter, penalty under section 114A automatically will come. Reliance is placed on the Apex Court decision in case of Vandana Art Prints Pvt Ltd. [2017 (50) STR 91 (SC)] "4.A neat submission that has been made by Mr. K. Radhakrishnan, learned senior counsel appearing for the appellant, is that in terms of Section 11AC of the Central Excise Act (hereinafter referred to as 'Act'), the penalty has to be equal to the duty so determined. 5.Section 11AC of the Act reads as under :- Penalty for "11AC. short-levy or non-levy of duty in certain cases. - Where any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reasons of fraud, collusion or any wilful misstatement or suppression of facts, or contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty, the person who is liable to pay duty as determined under sub-section (2) of section 11A, shall also be liable to pay a penalty equal to the duty so determined : Provided that where the duty determined to be payable is reduced or increased by the Commissioner (Appeals), the Appellate Tribunal or, as the case may be, th....
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....ot to charge the interest Under Section 11AB at all and we are afraid, language of Section 11AB is unambiguous. The person, who is liable to pay duty short levied / short paid / non levied / unpaid etc., is liable to pay interest at the rate as may be determined by the Central Government from time to time. This is evident from the opening part of Sub-section (1) of Section 11, which runs thus: Where any duty of excise has not been levied or paid or has been short levied or short paid or erroneously refunded, the person, who is liable to pay duty as determined under Sub-section (2) or has paid the duty under Sub-section (2B) of Section 11A, shall in addition to the duty be liable to pay interest at such rate.... The terminal part in the quotation above, which is couched with the words "shall" and "be liable" clearly indicates that there is no option. As discussed earlier, this is a civil liability of the assessee, who has retained the amount of public exchequer with himself and which ought to have gone in the pockets of the Central Government much earlier. Upon reading Section 11AB together with Sections 11A and 11AA, we are of firm view that interest on the duty evaded is payab....