TMI Blog2014 (3) TMI 127X X X X Extracts X X X X X X X X Extracts X X X X ..... assified the product. - there is strong force in the contentions raised by the ld. Counsel that if the goods have been exported, there cannot be any demand of duty and the minor procedural irregularities, if any, ought to be condoned. - Demand with interest and penalty set aside - decided in favor of assessee. Issue of classification of Hull - Held that:- The appellants M/s. WBB have been canvassing before the authorities that they had bonafide belief that the said hull cleared by them gets classified under 89.06 and not under 89.03 and at the most it can be a question of misclassification which does not require invocation of extended period for demand of duty - matter remanded for re-adjudicating the case. - Appeal Nos.: E/173/2010-DB, E/174/2010-DB, E/175/2010-DB, E/176/2010-DB, E/177/2010-DB, E/10061/2013-DB - ORDER No. A/10326 10331/2014 - Dated:- 3-3-2014 - Mr. M.V. Ravindran and Mr. H.K. Thakur, JJ. For the Appellant : Shri V.S. Nankani (Advocate), Shri V.K. Jain (Advocate), Shri Amit Laddha (Advocate), , Ms. Dimple Gohil (Advocate). For the Respondent : Shri Raju (Jt. D.R.) Per : Mr. M.V. Ravindran; All these appeals raise the common question of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... behalf of M/s. ABG and Revenue was represented by Shri Raju Commissioner (Authorized Representative). 4. The submissions made by ld. Counsel of M/s. WBB. is summarized as under: The relevant point under consideration is whether the structure cleared by the Appellants had acquired essential character of a vessel of a particular kind. The said Structure would be classifiable under Chapter Heading No. 8906 if the same does not have the essential character of a vessel of a particular kind. Note to Chapter 89 of CETA provides that a Hull, a unassembled or incomplete vessel, assembled, unassembled or disassembled or a complete vessel unassembled or disassembled, is to be classified in Heading No. 8906 if it does not have the essential character of a vessel of a particular kind. In the present case, the Respondent has not shown any evidence which proves that the said structure has the essential character of a Pleasure Yacht at the time of clearance of the goods from the factory of the Appellants. Burden is upon the Department to prove that the said structure had attained essential character of Yacht. On the contrary, the Appellants proved with evidences to substantiate its cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and yacht are completely distinct and different in terms of their utility / use and functions. While all vessels including a Yacht will have a hull as its central concept / foundation for the purpose of sailing and navigation, however, a vessel cannot be said to be a hull and it will have its own characteristics, utility and functions. The Respondent failed to appreciate the fact that the structure constructed by them was not capable of being used as such as with minor adjustments as the said structure was merely a wooden hull in which engines and other ancillary facilities was just fitted, which is standard practice of construction of a hull. For considering the said structure as a Yacht, various items as mentioned at page No.139 and 140 of Memo of Appeal are required to be fitted on the vessel to consider the same as Yacht . The said equipments, accessories and other essential fittings or fixtures were not fitted by the Appellants at the time of clearance of goods from its factory, but it appears from the proceedings that the same were fitted into the said structure / hull at ABG Shipyard Ltd. and Green Line Yacht Interiors Ind. Co. LLC, Dubai respectively. In the following d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... products manufactured by the assessee has not acquired the essential character of the finished products viz. Dumper as the function / characteristics of the said product is different from the finished products viz. Dumper . In the present case, the said structure is incomplete and cannot be said to have acquired the essential character for pleasure yacht as the said structure does not contain the components required for manufacturing of pleasure Yacht. It is submitted that in terms of Note 1 to Chapter 89 and sub-rule (a) of Rule 2 of the General Rules of Interpretation, a hull, an unfinished or incomplete vessel, assembled, unassembled or disassemble merits classification only under heading 8906 so long as it does not have the essential character of a vessel of any particular kind. In other words, the classification of the said structure dependent on the meaning of the expression essential character and whether the said structure had attained the essential structure of a pleasure Yacht. The Hon ble Madras High Court in Motor Industries Co. Ltd. Vs. Assistant Collector of Customs - 1992 (62) ELT 13 (Mad.) and Texla Enterprises Vs. CC reported in 2002 (145) ELT 537 (T) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... various machines, equipments and other essential accessories which were required for manufacture of pleasure yacht in Dubai. It is submitted that cost of goods constructed by the Appellants shows that the Appellants constructed wooden hull which was thereafter used for the construction of the pleasure Yacht. In the following decisions, it is held that if the total cost of equipments / parts imported in less than that of the complete / finished products then, such equipments / parts cannot be said to have acquired the essential character of the finished products: (a) HCL Vs. Union of India - 1992 (59) ELT 507 (Cal) (b) B.E. Office Automation (P) Ltd. Vs. C.C. - 2004 (171) ELT 460 (T) (c) New Century Impex Vs. CC - 2002 (142) ELT 707 (T) The Appellants place reliance upon the decisions of Menor Floatel Ltd. Vs. C.C. Calcutta 1999 (111) ELT 933 (T) The Respondent failed to appreciate that in terms of Rule 1 General Rules of Interpretation of Tariff [ GRI for short] classification shall be determined according to the terms of the headings and any relative Section or Chapter Notes. Rule 2(a) of GRI itself provides that any reference in a heading to an article shal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is well known that the stated policy of the Government of India is that exports ought not to be taxed. Thus duty, if any, paid on the said structure even otherwise would have been refunded. Without prejudice to the aforesaid and in any view of the matter the Respondent failed to appreciate that in the instant case the said structure was manufactured and thereafter cleared in the month of October, 2003, while the show cause notice was issued on 20.06.2008 by invoking the larger period of limitation. The issue in the present case was a pure question of law viz. classification of the said structure. The issue clearly is interpretation of the tariff entries. There can be no allegations of malafide in the issue as in the present case merely because the Appellant interpreted the tariff headings differently. 5. Ld. Counsel appearing on behalf of M/s. ABG made submission which on merits are: i) While adopting the argument made by the counsel for M/s. WBB on the classification of the case, it is the submission the burden of classification is on the department. It is submitted that the adjudicating authority has proceeded on erroneous premises that vessel at M/s. ABG s yard obtai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... received from M/s. WBB was clear for export to Dubai for further activity of construction of luxurious yacht. He would rely upon following cases in the proposition: a) Hydraulics India Services Pvt. Ltd. v. CCE, Bangalore, 2011TIOL1752CESTATBANG b) Super Spinning Mills v. CCE, Coimbatore, 2009 (247) ELT 805 (Tri-Chennai) c) Semco Electrical Pvt. Ltd. v. CCE, Pune, 2010 (18) STR 177 (Tri-Mumbai) d) Repro India Ltd. v. UOI, 2009 (235) ELT (614) Bom e) Texport Industries Pvt. Ltd. v. CCE, 2011 (24) STR 553 (Tri-Mumbai) 6. Ld. Departmental Representative on the other hand would draw our attention of the provisions of CETA, 1985 and more specifically to the chapter No. 89. He would submit that the said chapter starts with the note which would indicate that hull will get classified into chapter reading No. 89.06 only, if it does not have essential character of vessel of particular kind. He would submit that the product hull cleared by M/s. WBB had already attained an essential character of a yacht. After taking us through the various findings of the adjudicating authority, he would submit that the hull which was cleared by M/s. WBB was infact could not have been used fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anned copies of the documents that M/s. ABG had been always stating that the yacht is to be exported from their premises which has been allowed by the port officer as well as customs authorities. In view of the above, we hold that the adjudicating authority has erred in coming to the conclusion that the yacht was cleared from the M/s. ABG shipyard to home consumption. Yet in an another angle to the ABGs case, we find that M/s. ABG had considered the activities undertaken by them as a job work and had paid the service tax on such activities undertaken by them and reported the same to the authorities. In our view, the holding the services as being manufacturing activities may not arise as there is no dispute to the fact that M/s. WBB had cleared a wooden hull with super structure to the appellant, on which further activities were undertaken; the resultant structure was cleared for further fitment to Dubai, in terms of these, it cannot be held that the appellant M/s. ABG had intention to evade duty and hence misclassified the product. We also find strong force in the contentions raised by the ld. Counsel that if the goods have been exported, there cannot be any demand of duty and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... livery of wooden hull motor yacht on M/s. WBB on 12.12.2000. On perusal of records, it transpires that a quotation given by M/s. WBB to an enquiry from M/s. Raymond Ltd. for wooden hull motor yacht, we find that the order placed by M/s. Raymond Ltd. was in respect of a wooden hull motor yacht . Even if it is contended by M/s. WBB that they could not construct a complete yacht but what was constructed in WBBs yard was a hull with super structure, it had an essential character of a yacht. This factual position is disputed by ld. Counsel for M/s. WBB by reading chapter note and stated that essential character of a vessel of a particular kind has to be read as these should be presence of an independent / complete yacht in place. We do not agree with the proposition made by the Ld. Counsel, as in our considered view, hull which has came into existence in WBBs premises, by any stretch of imagination could not have been used for any other floating structure other than a yacht. The essentiality of constructing a yacht has been laid down by the hull and super structure built by M/s. WBB. The argument of the Ld. Counsel that the said wooden structure cleared by them cannot be termed as a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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