TaxTMI 
TaxTMI 
2018 (11) TMI 243
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.... 1975. ii. The benefit of exemption under 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 t....
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....rutiny of documents, such as: i. Shipbuilding Contract 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 tra....
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....as submitted- i. The vessel is principally designed for transportation of goods and hence more appropriately classifiable 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 classifica....
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.... cargo coaming between two cranes on its deck and is capable of carrying cargo on deck. The vessel can be called as "General Cargo Ship" ix. They strongly placed reliance on the decision of Tribunal in case of CGU Logistics [2011 (274) ELT 75 (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 th....
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....hipment Cargo Barge M.V. Royal Sesa'. The assessable value of the vessel was declared as 132.90,53,354/-. ii. The vessel was cleared for home consumption by classifying under Customs Tariff item No. 8901 9000 claiming duty exemption available under Notfn. No. 12/2012-Cus dt 17.3.2012 (Sl.No.461) and Notfn. No. 21/2012-Cus dt 17.3.2012. The said B/E was assessed and 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 h....
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....of Shipping (IRS) Goa, has in his statement dt 1.4.14 has affirmed that the vessel 'M.V.Royal Sesa' was not having any cargo hold and was having only 'Cargo Coaming' on the deck in between the two cranes filled on its deck. It is submitted that the purpose of such storage facility on board is evidently to provide buffer storage for material handling and is neither meant or designed for regular transport. (iv) On basis 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....
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....is quite evident that navigability is not a criteria for determination of the Classification under the said chapter. Navigability would be one of the features for all the goods classifiable under chapter 89. In Chapter 89, vessels performing specific functions are classified on the basis of the function performed although they may have navigability, self propulsions and cargo carrying facility i.e. fish vessel (8902), Tugs (CTH 8904), dredger, a salvage ship, house boat (CTH 8905), Warship, pilot boat, hospital ship (CTH 8906) are classified in separate headings and they obtain their essential character from the general structural design 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 foll....
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....erformed by the vessel and terms of the relevant tariff heading. Reliance In this regard is also placed on the case of Indian Aluminium Cables Ltd. v/s UOI (1985 (21) ELT 3 (SC) and Akbar B Jiwani v/s Commissioner Customs 1990 (48) ELT 441 wherein it was held that the "ISI specification were not relevant (for classification under Customs Tariff) when they are only meant for quality control". 4.7 It is observed that the beneficiary certificate issued by Chengxi Shipyard Co. Ltd. dated 01.12.2012 referred to the vessel as Floating Terminal Station. Similarly, the shipping order issued by the Chengxi Shipyard Co. Ltd. referred to the vessel as crane barge. 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 appli....
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....ction. HSN Explanatory Notes to Chapter 89.05 state that - This heading covers (A) Light-vessels, fire-floats, dredgers, floating cranes, and other vessels the navigability of which is subsidiary to their main function. 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 recovery of sunken vessels; permanently moored air-sea rescue floats, bathyscaphes, pontoons fitted with lifting or handling machines ( e.g. derricks, cranes, grain elevators) and pontoons clearly designed to serve as a base for these machines. 6.The vessel 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 ....
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....y the lower authorities. In the first mode of transshipment spelt out by the learned SDR, 'BULK PROSPERITY' is anchored between a bulk carrier and a barge and discharges cargo from the bulk carrier into the barge by making use of a conveyor belt system. This mode of transshipment is not seen discussed in the impugned order, nor in the order-in-original. In the second mode of transshipment referred to by the SDR, the transhipper navigates between the anchorage of the bulk carrier and the shore. In the third mode of transshipment, it remains stationary at the initial and final stages of the process of transshipment and navigates at the intermediary stage. These modes of transshipment 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 certificat....
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....n examination of the vessel, the assessing authority suggested that the vessel be classified under Heading 8905. Subsequently, there was some correspondence between the assessing authority and the assessee. In a letter dated 22-4-2008 addressed to the Assistant Commissioner concerned, the assessee submitted that the vessel was a sea-going ship fitted with mechanical means of propulsion, which would imply that navigability is a primary function of the vessel. They submitted that the primary function of the vessel was to carry and transport cargo from other ships waiting at the bay and unload the same at the port and vice versa. It was submitted that this function was possible because 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 ....
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....een described as "Multi-purpose Support Vessel (MSV) and not as supply vessels. The permission given by Indian Navy for these vessels was for underwater inspection and repair of offshore structures in Mumbai High oil fields of west coast and not for transport of goods or persons. The Indian Register of Shipping and Bureau Veritas assigned the class notations to these vessels which confirms that the vessel is equipped with specialized fire-fighting facilities, diving equipment and dynamic positioning capability which make it clear that the vessels are not supply vessels for transport of goods and persons but a specialized multi-purpose support vessel, the navigability of which is subsidiary to the 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 ....
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....ovision of supply services to offshore installations which implies they are meant for transporting goods and persons from ports to offshore installations. Therefore, navigation is certainly a primary function of vessels which are certified as 'supply vessels'. (3) The vessel Malaviya Thirty Six is capable of carrying approx. 2900 MT of cargo as well as 90 persons. Similarly vessel HAL Anant is capable of carrying 3972 tons of cargo and 90 persons. Thus the vessels are factually designed so as to be capable of carrying persons and goods from port to ONGC platforms and therefore, they are rightly classifiable under CTH 89.01. (4) Even prior to the acquisition of the vessel, the vessels were performing 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 perfo....
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....the tribunal has concluded that the vessel under the consideration was a supply vessel after determining the supply as essential feature of the vessel. Since this decision too is distinguishable on facts reliance placed by the appellant on this decision is uncalled for. In our view the decisions relied upon by the appellant are clearly distinguishable and not applicable in present case. 4.14 One factor which makes this case unique and distinguishable from all other cases is the declaration made by the exporter to the Customs Authority in China. Exporter has declared the said vessel as "floating cranes" as is evident from the documents resumed during the investigation. When the exporter himself is declaring the 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 "Car....
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....nal held- "19. The next question to be decided is as regards the applicability of time bar of six months, as claimed by the appellants. Here, once again, the facts are against them. Appellants can hardly contend that they discharged the onus of making correct declaration if they themselves withhold the description which is commonly used in respect of the goods not only by themselves, but also by those from whom they buy or to whom they sell the products. When they were themselves both, buying and selling the goods as nuts, it is difficult to understand why they should describe them as end fittings in the declaration to the department. Even if they did not agree that they were correctly classifiable under Item 52-CET, they should have 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 ....
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....luenced to some extent by the fact that the goods are stated to be Armenian origin but have been shipped from Hong Kong. When asked about this, the Counsel for the importer has no answer. In these circumstances, we therefore think that penalty was imposable under clause (a) of Section 112 of the Act but again think it proper for the Commissioner to determine the quantum." xi. In view of above discussions we hold that extended period of limitation under Section 28 for demanding the duty was invokable in this case. Further in view of the misdeclaration made the vessel M V Royal Sesa was liable to be confiscated and has been rightly confiscated by the adjudicating authority. xii. Since there was deliberate mis-declaration on the part of the importer, 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.....
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.... Sahakari [2007 (215) ELT 23 Bom] has held as follows: "10. So far as interest Under Section 11AB is concerned, on reference to text of Section 11AB, it is evident that there is no discretion regarding the rate of interest. Language of Section 11AB(1) is clear. The interest has to be at the rate not below 10% and not exceeding 36% p.a. The actual rate of interest applicable from time to time by fluctuations between 10% to 36% is as determined by the Central Government by notification in the official gazette from time to time. There would be discretion, if at all the same is incorporated in such notification in the gazette by which rates of interest chargeable Under Section 11AB are declared. The second aspect would be whether there is any discretion not 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 ....
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....may be, who shall be liable to penalty equal to the duty or interest so determined. The expression used is "or", which is disjunctive between duty or interest. Further use of expression "as the case may be" clearly suggests that the said section is referring to two different persons and situations. One which may be liable to duty and the other which may be liable to interest only and provides that in both the situations, the person liable to duty would be liable to penalty equal to duty and the person liable to interest would be liable to penalty equal to interest. There is no warrant to read "or" as "and". In view of the above I find no reasons to interfere with the impugned orders of Commissioner (Appeals). Revenue's appeals are accordingly rejected." 8.3 We do not find any reason tom differ with the said decision of tribunal. Accordingly the appeal filed by revenue is dismissed. 9.0 In result both the appeals filed by the Appellant and Revenue are dismissed. (Pronounced in court on 2.11.2018) ============= Document 1रोयल सेना ROYAL SESA SESA GOA Document 2 BENEFICIARY CERTIFICATE This is to certify that we, Chengxi ....
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....21st May 2011, and including any and all addenda thereto (hereinafter called the "CONTRACT"). made between the BENEFICIARY and SESA GOA LIMITED, a company incorporated under the Companies Act, 1956 and having its registered office at Sesa Ghor, 20 EDC Complex, Patto, Panjim, Goa, India (hereinafter called the "APPLICIANT"), do hereby set over, sell, transfer and assign onto the APPLICIANT all its title, right and interest in and to One FLOATING TRANSFER STATION ( hereinafter called the VESSEL), together with all machinery, equipment, accessories, stores and spare parts now on board the VESSEL, to have and to hold said property onto the APPLICIANT , its successors, administrators and assignees forever. The BENEFICIARY hereby covenants for itself, its successors and assignees that it is the lawful owner of the VESSEL, that it has the power and lawful right to sell and dispose of the VESSEL, her appurtenances and title thereto and that it warrants that the VESSEL is free and clear of any liens, charges, claims, mortgages, or other encumbrances and that it warrants and defends the title of the VESSEL against all....