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TMI Blog2014 (3) TMI 127X X X X Extracts X X X X X X X X Extracts X X X X ..... sun deck. WBB fitted ancillary items like engines, propeller, shafts on the said wooden structure and vide their letter dated 23.10.2003 delivered the wooden hull and super structure to M/s. Raymond Ltd. and also issued the invoices dated 07.09.2004 for the work undertaken by them indicating therein wooden vessel bare hull and allowed the said structure towed to M/s. ABG, Surat for carrying out further work. After the investigation conducted by the Department, it was noticed that the wooden vessel hull cleared by the appellant would merit classification under heading 89.03 of CETA and liable to Central Excise duty. Investigation was also further carried to M/s. ABG and it was found that M/s. ABG also did not discharge the Central Excise duty on the completion of the yacht. The authorities issued show cause notice to both M/s. WBB and M/s. ABG directing them to show cause is to why Central Excise duty be not demanded from them alongwith interest, penalties be not imposed on them and individuals (whose appeals are listed) also directed to show cause as to why penalties be not imposed on them for violation of various provisions of Central Excise law. The entire tenor of show cause iss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f masts, funnel and top hamper, but including superstructure. SB Sarkar's 'Words and Phrases of Excise, Customs & Service Tax, 4th Edition, at pg. 2081. Yacht - A light sailing vessel equipped for racing, a large usu. Power driven vessel equipped for racing Oxford English Dictionary (1995) A light fast sailing vessel, a sailing steam powered etc. vessel elegantly fitted out for pleasure trips or racing The Chambers Dictionary The term 'hull' and 'yacht' as has been defined in the Wikipedia is reproduced hereinunder: Hull - hull is the body of a ship or boat. It is a central concept in floating vessels as it provides the buoyancy that keeps the vessel from sinking. General Features Nearly all watercraft, from small boats to the largest ships, adhere to a general form that serves the needs of stability and efficient propulsion, featuring: * Horizontal cross-sections that have narrow, usually pointed, fronts (at the bow). * Smooth widening from the boy until roughly the middle of the length (midships), and often narrowing smoothly but usually significantly to the extreme end (the stem), whose width may range form a large to an insignificant fraction of the beam. Yacht - A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Respondent failed to appreciate the fact that the structure / hull cleared by the Appellants was without having equipments / characteristics of the pleasure yachts mentioned at Page No. 140 and 141 of Memo of Appeal and the same were fitted later on by ABG Shipyards Limited and Green Line Yacht Interiors Inds. Co. The structure made by the Appellants was having the following components: * Hull and Superstructure without doors / windows * Sea / fresh water, fuel systems electrical cabling, AC Piping which were partially done * Alignments of the two main engines and shafts * Generators commissioned and dummy load tested. * It is clear from the perusal of the equipments / characteristics of the pleasure yacht and the said structure that * The vessel was launched at the Appellants yard as an incomplete hull, and was thereafter taken in tow by an ocean going tug and towed to Dubai for fitting. * The said structure was not capable of self propulsion, * The said structure was not capable of steering herself, * The said structure had no living accommodation available, * The said structure had no navigational capabilities, * The said structure was not fitted with communication ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... required major additions. In fact, as aforesaid, the said structure, in the state in which the same was cleared, was not even a complete vessel inasmuch as it did not have important attributes of being steered and navigated, which is central to all vessels, whatever be the nature. The vessel even lacked basic necessities and amenities like anchor and / or its allied outfit, equipment and accessories, mooring ropes, navigational lights, search lights, fire fighting equipments, lighting and allied electrical systems, sanitary system, weather light hatches, sea water inlet and outlet etc. The vessel thus was merely a floating structure without any capability of being identified as any particular kind of vessel. As submitted by the Appellants in paragraph 4.13 of their reply to the show cause notice there were at least 37 identifiable equipments / components necessary for making the said structure into a vessel, much less could it be called a yacht meant for pleasure. * It is submitted that CCE v. Simplex Mills Co. Ltd., 2005 (181) ELT 345 (S.C.); CCE v. Carrier Aircon Ltd., 2006 (47) STC 421 (S.C.) and Dunlop India Ltd. v. UOI, 1983 (13) ELT 1566 (S.C.) to state that recourse to Ge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid Rules of Interpretation of Tariff to the case on hand it is amply clear that the said structure does not have the essential characteristics of a yacht much less a pleasure yacht the same is required to be classified under Customs Tariff Heading 8906 as claimed by the Appellants. * The Respondent failed to appreciate the fact that it is settled law that while classifying an article the heading most specific to the same ought to be preferred. In the instant case Chapter Heading 8906 is the most specific heading when considered in the light of Note 1 to Chapter 89 read with Rule 2(a) and Rule 3(a) of the GRI and, therefore, the same ought to be preferred as against the Heading suggested by the department. * Without prejudice to the submissions and in any event the Respondent failed to appreciate that it is settled law as held by the Hon'ble Supreme Court in case of Poulose and Mathen Vs. CCE 1997 (90) ELT 264 in case of issues relating to classification where two opinion are possible, assessee should be given benefit of doubt and the opinion favourable to it should be given effect to. In Terai Overseas Limited Vs. Commissioner 2001 (134) ELT 337 the Hon'ble Calcutta High Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpletion of the job given to M/s. ABG, the vessel was exported to Dubai under shipping bill No.F-30/04-05 dt. 09.02.2005. He would then draw our contention to the copy of the shipping bill annexed in the appeal memoranda and also draw our attention to the various documents like examination report of the customs authority and would submit that the vessel which was cleared for export was incomplete wooden cargo vessel ASHEMA and declaration was in conformity to declaration in the invoices and the packing list submitted. It is his submission that the appellant had infact on their own paid service tax on the activity conducted by them on the wooden structure received from M/s. WBB. It is his submission that the appellant had categorically stated in the service tax returns that they are undertaking an activity of repairs and maintenance / job work on the boat received from M/s. WBB. iii) It is his submission that the following case laws specifically record that when goods have been exported, no duty can be demanded. a) Barrot Exports v. CC, 2006 (203) ELT 321 (GOI) b) Rajasthan Industries v. CC, 2006 (203) ELT 295 (Tri-Del) c) CCE, Hyderabad v. Ravi Foods, 2011 (271) ELT 436 (Tri-Ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the findings against M/s. ABG. 7. Heard both sides and perused the records. 8. We have to put the on record that though the case of demand of duty of M/s. WBB and M/s. ABG are indicated, the findings need to be recorded individually in this case. 9. As regards the demand of duty on M/s. ABG since the issue involved is a short question, is whether duty liability arises on export of goods or not. Both sides agreed and did not dispute the fact that M/s. ABG had received a wooden structure from M/s. WBB for further fittings in their shipyard, it is also undisputed that the appellant M/s. ABG had undertaken further activity on the wooden structure received from M/s. WBB and they had discharged the service tax liability on such job work undertaken by them on behalf of M/s. Raymond Ltd. under Business Auxiliary Services. 9.1. The main plank of confirmation of demand of duty against M/s. ABG is on the ground that M/s. ABG had misclassified the activities and had manufactured the yacht and the said yacht was having essential character for classification under 89.03 of CETA, 1985. We find that the adjudicating authority, though recorded various findings on the said classification, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w, this takes us to appeal filed by M/s. WBB against the demand of the duty on the wooden structure cleared by them by holding the classification under chapter reading No. 89.06 and consequent penalties. 10.1. We have considered the submissions made by both the sides on the issue. Undisputed facts are M/s. Raymond Ltd. had placed an order of a complete yacht with M/s. WBB. M/s. WBB had manufactured a wooden structure a hull with the super structure and cleared the same to M/s. ABG shipyard for further activities of converting the said wooden structure into a yacht. It is pertinent to consider the rival headings i.e. heading No. 89.03 as claimed by Revenue and 89.06 as claimed by the assessee which is as under: Heading No. Sub-heading No. Description of goods Rate of duty 89.03 8903.00 Yachts and other vessels for pleasure or sports; rowing boats and canoes 16% 89.06 8906.00 Other vessels, including warships and lifeboats other than rowing boats Nil It is also pertinent to reproduce note to Chapter 89 which is as under: CHAPTER 89 SHIPS, BOATS AND FLOATING STRUCTURES Note: A hull, an unfinished or incomplete v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. In our view, the submissions made by the Ld. Counsel needs due weightage for more than one reason. Firstly, it is seen from the records that the appellant M/s. WBB had raised a bill on M/s. Raymond Ltd. in the month of October 2003 and indicated therein wooden vessel bare hull, the bonafide belief of the appellant that this vessel bare hull can be classified under 89.06 as other vessels, cannot be called in dispute as the note to Chapter 89 can be understood in more than one way. It is also to be noted that though they had taken such a specific plea before adjudicating authority, the adjudicating authority in the discussion and findings has not recorded any reasoning for disagreeing with the appellant on the invocation of extended period. Secondly, on perusal of the entire OIO in the case of M/s. WBB, we find that adjudicating authority has not recorded a single finding on the limitation, but has recorde ..... X X X X Extracts X X X X X X X X Extracts X X X X
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