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2015 (7) TMI 998 - CESTAT MUMBAI

2015 (7) TMI 998 - CESTAT MUMBAI - 2015 (329) E.L.T. 913 (Tri. - Mumbai) - Classification of vessels - Offshore Hunter - coastal tug offshore hunter with barge freight' - Denial of benefit of Notification No. 21/2002 and 20/2006 - Confiscation of goods - Imposition of redemption fine - Penalty u/s 114A and 112 - if the vessel is used for carrying persons and cargo as well as for towing operations, what is the primary purpose for which the vessel is designed - Held that:- Commissioner finds that .....

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ssel for transport of persons as per the Certificate of Indian Registry. - As the vessel in question is a supply vessel used for transport of persons and goods, the correct classification would be CSTH 89019000 which covers "Other vessels for transport of the goods and other vessels for transport of both persons and goods." And the goods falling under CTH 8901 are exempted under Not 21/2002 read with Notification No. 20/2006.

Revenue has invoked the extended time period to demand duty .....

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ire, bollards at the sides. The Custom officers were free to examine the vessel with respect to any documents for the purpose of determination of classification. - There is no misdeclaration whatsoever. Consequently there is no question of confiscation and option to redeem on payment of redemption fine. We set aside the confiscation. - classification ordered by the Commissioner is set aside along with the demand of duty, interest and penalties on the appellant as well as the Directors. - Decided .....

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of Customs Mumbai holding the classification of the vessel 'Offshore Hunter' under CTH 8904, denying benefit of Notification No. 21/2002 and 20/2006, confiscating the vehicle with option to redeem on payment of redemption fine, demanding differential duty and interest and imposing penalty under sections 114A. Appeals have also been filed by the two Directors against imposition of penalty under section 112. 2. The appellant had purchased the vessel 'Offshore Hunter' earlier known .....

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stoms notification 21/2002 (serial number 352) and nil SAD under notification 20/2006 (serial number 1). After four years, on the basis of intelligence and investigations, the Department viewed that the classification of the vessel had been mis-declared and the correct classification should be CTH 8904 0000 as a tug. Since the vessel was engaged abroad, the appellant could not present the vessel for scrutiny and paid customs duty of ₹ 1,19,27,707/- under protest. Thereafter the vessel was .....

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boats and similar vessels principally designed for the transport of persons and goods whereas Customs heading 8904 covers tugs and pusher craft. The vessel in question is not designed as a tug but as a vessel for supply of goods as well as for carrying passengers. It has been certified as a supply vessel by the Kuwaiti Registry as well as by the Registrar of Indian Ships. The Mercantile Marine Department under the Ministry of Shipping, Govt. of India clarified in their letter dt 29.6.12 to the .....

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lly designed and constructed for the transport of specialised stores and cargoes to fixed and mobile offshore installations. The supply vessels which also comply with the requirements of tugs... will be eligible to be assigned class notation 'tug/supply vessel'". 4.1 According to the ld counsel, the determining factor as to whether the vessel is designed as a supply vessel or is designed for towing other craft. In this connection he referred to the HSN Explanatory Notes on Heading 8 .....

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rry cargo and has accommodation facility for 18 persons apart from crew of 15 persons. And the scope of work as per contract dated 13.7.2011 with the consortium of Valentine Marine and Valentine Maritime (Mauritius) Ltd clearly states that it was engaged for offshore duties / services. 4.2. According to the appellant the Commissioner relied on Rule 3 (c) of the Rules for Interpretation of Classification to hold that the vessel is classifiable as a tug. While reaching this conclusion the Commissi .....

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red stating that the vessel has a winch. Therefore there was no misdeclaration and consequently the question of confiscation under section 111 (m) of the Customs Act does not arise. 5. The Ld AR appearing on behalf of Revenue reiterated the findings of the Commissioner. He stated that the Certificate of Kuwaiti Registry dated 2.5.1994 is very old. Many years have passed since then. The movement of the vessel and its status till the time it was registered under the Indian Merchant Shipping Act in .....

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ld AR this is sufficient evidence that the vessel in question is a tug. He showed other towing plans for other vessels. In all of them the vessel 'Offshore Hunter' is referred to as a tug. Even the Port Trust record which is maintained by the Port trust authorities for vessels which are towed to the high seas and back, referred to the vessel 'offshore hunter' as a tow. 5.1 The Ld AR stated that the vessel in question is described as offshore tug/supply ship in the website EQUASIS .....

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on of goods and their essential character. 5.2 Lastly he relied on the statements of the Directors of the appellant who stated that the vessel does towing activity. 6. We have carefully gone through the facts of the case and the submissions made by both sides. 6.1 To decide the classification of the vessel in question it would be appropriate to examine the purpose for which the vessel is designed, the HSN Explanatory Notes which guide the Department in classification, the various documents produ .....

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y evidence that the certificate does not describe the vessel as it was in 1994. The Certificate of Indian Registry dt 2-9-2008 in which the Registrar of Indian Ships certifies the particulars of a ship under the Merchant Shipping Act 1958 describes the vessel 'offshore hunter' as an OSV i.e. Offshore Supply Vessel. This certificate is dated 2 nd September 2008. The certificate also gives the earlier name of the vessel that is 'Salwa' which name is used to describe the vessel in t .....

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ey have categorised the vessel. The vessel is an 'Offshore Supply Vessel" having towing facilities". Much as we appreciate the efforts of Ld AR in showing us various documents to prove that the vessel is a tug, we find it difficult to ignore the clarification given by the Ministry of Shipping. 6.3 The documents referred to by the ld AR are, firstly, towing plan which are plans prepared by the Indian Register of Shipping approving the movement of the vessels along coastal areas. It .....

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ons even though it is a supply vessel. But that by itself does not necessarily lead to the classification or description of the vessel as a tug. 6.4 The appellant have referred to the HSN Explanatory Notes under Customs heading 8904 describing tugs which state that "These our vessels primarily designed for towing other craft. They may be of type used for sea or for inland navigation. They are distinguishable from other vessels by their specially shaped and strengthened hulls, by their power .....

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n is forthcoming from the Commissioner's Order as to how the specifications of the vessel in question are actually different from those of supply vessel. In fact, the HSN Explanatory notes on chapter 8904 further state that 'The vessels of this heading are not designed for the transport of persons or goods....' The appellant have explained how the vessel in question is designed for transport of goods and cargo. For example, the arrival report dated 8.11.2011 of Custom house Mundhra w .....

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persons and cargo as well as for towing operations, what is the primary purpose for which the vessel is designed. Merely having a winch does not lead to conclusion that the vessel is a tug. Supply and passenger ships can also have a winch. To decide the issue at hand, in the absence of any technical document of the design of the vessel, we have to rely on the Certificate of Indian Registry issued under the Merchant Shipping Act 1958. The description retrieved from the web-site QUASIS by Revenue .....

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vices as a supply boat and other offshore duties/services within the safe working capability of the vessel. Ans- offshore duties are any duties that the chartered may assign to the vessel to carry out subject to the same being with the safe working capability of the vessel, such as, boat landing, patrolling, supply runs, towing, transportation of men and material, cargo carriage, surveying activities et cetera. Ans- Once we we give the vessel on time charter, the vessel would undertake any jobs .....

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ations only. 6.7 The Commissioner has placed reliance on the Rules for Interpretation of the Schedule (to the customs tariff). Reading down the rules he finds that rule 3a and rule 3b are not applicable and therefore he resorts to rule 3c which states that where goods cannot be classified by reference to 3a or 3b, they shall be classified under the heading which occurs last in the numerical order among those which equally merit consideration. In our considered view and on the basis of the analys .....

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