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M/s Raj Shipping Agencies Ltd, Shri Noshir Mehta, Shri Parvez Mehta Versus Commissioner of Customs (Import) , Mumbai

2015 (7) TMI 998 - CESTAT 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 rule 3a and rule 3b are not applicable and therefore he resorts to rule 3c .....

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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 be alleging that the appellant had mis-declared the capabilities of the ve .....

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ssel 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 in favour of assessee. - Appeal No. C/88379/2014, C/88380/2014 & C/88381/2 .....

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nter' 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 as 'Salwa" from Kuwaiti oil Tanker company, Kuwait in the year 200 .....

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on 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 seized under section 110 (1) of the Customs Act on 3.7.2012 and released on .....

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s 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 Customs Department (before issue of show cause notice) that "There is .....

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rgoes 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 8904 which state that the vessels of heading 8904 are not designed for the t .....

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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 Commissioner stated that Rules 1, 2 and 3 (a) or (b) are not applicable. However, a .....

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ion 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 2008 is not known. Therefore the Certificate of Kuwaiti registry cannot be .....

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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. He referred to a document which is an arrival report prepared by Custom H .....

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ements 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 produced by both sides which indicate the nomenclatures used for describing the .....

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994. 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 the Certificate of Kuwaiti Registry. During investigations the Department ra .....

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l" 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 is true that the towing plans describe the vessel as a tug. But as we have .....

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ily 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 powerful engines disproportionate to the size of the vessel, and by various deck .....

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ions 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 which is referred to by the learner AR, under S No 9: Cargo mentions the des .....

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pose 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 cannot be preferred over the certificate given by the Registrar of Indian S .....

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orking 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 that the character wants within the vessel's safe working capability in .....

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rpretation 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 analysis above, we find that the heading 8901 provides the more specific descript .....

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