TMI Blog2016 (7) TMI 645X X X X Extracts X X X X X X X X Extracts X X X X ..... normally function or perform other main function in a stationary position. In the case in hand, it is admitted fact that the vessel is continuously moving while laying the pipes and undertaking any operation in relation to the petroleum exploration. In our considered view, the classification of the vessel LTS 3000 would be correct under 8901 or 8906 but not definitely under 8905 as has been held by the Adjudicating Authority. If the classification of the vessel falls under chapter heading 8901 or 8906, the duty liability is 'nil' is undisputed. - Demand set aside - Decided in favor of assessee. - Appeal No. C/86738 to 86742/15 & C/86765/15- Mum - Order No. A/87952-87957/16/CB - Dated:- 13-6-2016 - SHRI M.V. RAVINDRAN, MEMBER (JUDICIAL) AND SHRI C.J. MATHEW, MEMBER (TECHNICAL) Shri V.S. Nankani, Sr. Advocate with Shri J.H. Motwani, Advocate for the appellant for 1 to 5 Shri T. Viswanathan, Advocate with Srinidhi G., Advocate for appellant no. 6 Shri V.K. Singh, Spl. Counsel for the respondent ORDER Per: M.V. Ravindran This appeal is directed against Order-in-Original No. 32/2015/CAC/CC(I) /AB/GR.VB dated 04.06.2015. 2. Since all these appeals a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition No.29 requires that the goods are imported by the Oil and Natural Gas Corporation or Oil India Ltd. (hereinafter referred to as the licensee) or a sub-contractor of the licensee. 6. The investigations carried out revealed that : (i) The vessel LTS 3000 was imported permanently on full payment to the supplier and it was registered at Indian Register of Shipping on 18.11.2010; (ii) The importer had submitted two different invoices one before Customs and other before DGH. Both these documents were filed by M/s. GAC Shipping (India) PVT Ltd. CHA on behalf of the importer. The Invoice submitted to Customs and DGH though had same number and date, the contents like name of the consignee, CIF value and additional information related to offshore activities were found to be different. Both these invoices were signed by Shri Ashiwini Kumar, CEO of M/s. OIF as well as of M/s. L TSSPL. (iii) The Bill of Entry was filed on 02.12.2010 and the application for Essentiality Certificate was filed on 03.12.2010. The Essentiality Certificate having importers name as M/s. L T Sapura Shipping Pvt. Ltd. was issued on 06.2.2010. This essentiality Certificate was issued subject to No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fter taking us through the records of the case submits that the issue is regarding denial of benefit of Notification 21/02-Cus on the vessel imported by the main appellant as also the classification of the said vessel. 9.1. It is his submission that ONGC was a licensee of government of India for exploration of oil and gas in the Mumbai High and had by contract dated 16.10.2009 awarded the said contract to Larsen Toubro Ltd. for MHN Process Platform Living Quarters project. The project also had a clause for getting the work done through the sub-contractors as is evident from clause no.5.2.2. It is his submission that in pursuance of this clause the main appellant was appointed by Larsen Toubro Ltd. to undertake the various works in relation to the contract. It is his submission that the benefit of Notification 21/02-Cus at sr. No. 214 is applicable to the main appellants vessel as the said work undertaken by the main appellant is in respect of exploration/petroleum operation of ONGC. He would then take us through the exemption notification. It is his submission that the terms contractor and sub-contractor as indicated in the Notification have not been defined anywhe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10 requested ONGC to process the Essentiality Certificate application for importation of vessel without payment of duty. He would submit that the licensee ONGC always understood the Appellant as a bona fide sub-contractor and the Essentiality Certificate was issued by DGH on the basis. It is his submission that this Essentiality Certificate was produced at the time of clearance of the vessel. He would submit that the revenue authorities after initiation of the investigation directed the DGH to cancel the Essentiality Certificate given to L T. The said Essentiality Certificate was cancelled by DGH which was challenged by the appellant in writ petition before the High Court of Bombay and their Lordships stuck down the cancellation of the certificate and restored the Essentiality Certificate, which would mean that the vessel which has been imported by the main appellant is used for petroleum operation of ONGC. He would then draw our attention to affidavit filed by the officers of ONGC before High Court on this point and submits that before the higher court it is admitted that the main appellant is a bonafide sub-contractor of L T in terms of condition no. 29 of Notification 21/02-Cus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is a self propelled ocean going vessel having capacity to conduct multiple functions to which navigation along with pipe laying being primary functions. The vessel is also designed to carry cargo for the purpose of laying pipes and further lay pipes on the sea bed. He would submit that the classification under 8905 as proposed by the revenue in the impugned order is totally incorrect as vessel LTS 3000 navigation is not subsidiary to the main function as is the requirement of the Tariff 8905. It is his further submission that to get classified under Tariff 8905, the vessel has to be stationary while performing the main function, in the case in hand vessel is required to navigate its way to lay pipes on the ocean bed. It means that navigation is its primary function. Subsequently he would take us through HSN explanatory notes to submit that the classification as proposed by the revenue is incorrect. It is his further submission that the vessel LTS 3000 has a crane and is equipped with pipe laying equipment and is a self-propelled ship, registered under the Merchant Shipping Act, as an ocean going vessel. He would submit that the Indian Register of Shipping class have certified th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the case. He would submit that the penalty imposed on the appellant is totally unwarranted as all the actions of the appellant are in compliance with what was required as a employee of ONGC for implementation of the agreement between ONGC and L T. As regards the affidavit, it is his submission that it has been filed and submitted to DGH, clearly states that L T is sub-contractor of L T and never contended that main appellant is a sub-contractor of ONGC. The affidavit did not misguide the DGH. He relies upon the decision of the Tribunal in Schlumberger Asia Services P. Ltd. for the proposition that name of sub-contractor need not be mentioned in the agreement between L T and ONGC; relies on the judgment of Tribunal in J.M.Baxi Co.(supra). For the proposition that no penalty can be imposed on the person who has not dealt with the goods and merely discharged his duty obligation; ONGC - 1995 (79) ELT 117 for the proposition that no penalty can be imposed on PSU or its employees. He would rely on the Essentiality Certificate issued by the DGH dated 29.10.2012 wherein the name of the sub-contractor and contractor are clearly mentioned and main appellants name is mentioned as import ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he main appellant. 11.2. It is his submission that Essentiality Certificate issued to the main appellant is in violation of the condition 29 stipulated in Notification No.21/2002 and main appellants are not entitled to benefit of exemption. For this purpose he placed reliance on the judgments of the apex court in Gammon India Ltd vs. CC , Mumbai 2011(2690 ELT 289(SC). It is settled law that an exemption is an exemption and should be construed strictly. For this purpose, he placed reliance on the following judgement:- (a) Jairaj Ispat Vs. CCE, Hyderabad-2001(127)E.L.T. 722 (b) Novapan India Ltd vs. CCE Hyderabad 1994 (73) 769(SC) (c) Golden Dew Tea Factory Vs. commissioner of C.Ex. Coimbatore-2007(219) ELT 362. 11.3. It is his submission that reliance placed by the ld. Counsel on the judgment of Bombay High Court is incorrect as High Court had specifically stated the views expressed by the judgement are prima facie views and it left the issue of deciding the main appellant is a sub-contractor or otherwise to the authorities. 11.4. As regards classification of the vessel, it is his submission that has a special crane having capacity to lift 3000 Mt and is fit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ain reading of entry 214 would specifically indicate that the goods which are required in connection with the petroleum operations undertaken under petroleum exploration licences are exempt from payment of duty if they fulfil the condition as mentioned at Condition no. 29. It is undisputed that ONGC are licensee for petroleum operations undertaken under petroleum exploration licences or mining lease post 01.04.1999 granted by the Government of India. The condition as reproduced above, of the notification, clearly indicates that the goods can be imported by ONGC or a sub-contractor which are used in connection with the petroleum operations to be undertaken. In the case in hand it is undisputed that vessel LTS 3000 is used in the petroleum operations as can be ascertained from the Essentiality Certificate issued by the DGH. Clause (c) of condition no. 29 is being disputed by the revenue that the appellant herein is not a sub-contractor. On plain reading of the affidavit filed by the respondent officer i.e. Shri Rajeev Kumar, DGM (E) of ONGC before the Hon'ble High Court in writ petition no. 2980 of 2011 on oath states that - It was pointed out that in the request for issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2/11/2010,80515948 dtd 12/11.'/2010, IV071542 dtd 12/11/2010 This is to certify that imported goods, as per attached list, are required for petroleum operations undertaken under PELl Mining Lease issued or renewed after the 1st of April, 99 and granted by Govt. of India/State Govt. and have been imported for execution of contract as per subject and reference matter mentioned above. This has reference to said Notification No. 21/2002 Customs dated 01-03-2002 amended vide Notification No. 26/2003-Customs dated 1-3-2003 as per S. No. 214 of the Table, List 12, Condition 29 issued by Ministry of Finance (Department of Revenue), New Delhi. This certificate is valid for a period of six months from the date of issue. 13.4. A plain reading of the Essentiality Certificate as reproduced hereinabove would indicate that the vessel LTS 3000 is required for the petroleum operations undertaken by the ONGC. This Essentiality Certificate is affirmed as correct Essentiality Certificate by the High Court of Bombay in the case of L T Ltd. in a writ petition in favour of petitioner, (reported at 2013 (298) ELT 217 (Bom). The issue of Essentiality Certificate now stands decided ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n terms of Notification 21/02-Cus dated 01/03/2002 as amended by notification no. 26/2003-Cus dt. 01/03/2003 Sl.No. 214 of the table of import MHN- Process Platform Living Quarters project is awarded to M/s. Larsen Toubro Ltd., Mumbai on turnkey basis. M/s. Larsen Toubro Ltd. has engaged L T Sapura Shipping P. Ltd. for execution of said job. We hereby declare that items vide B/L No................. dated................ and invoice no. IN/LTS3000/005 dtd. 12.11.2010. 185753 dtd. 12.11.2010, 80515386 dtd. 12.11.2010, 80515948 dtd. 12.11.2010, IV071542 dtd. 12.11.2010 are being imported by L T Sapura Shipping P. Ltd. and the goods will be used for Mumbai High North Filed, MHN Process Platform Living Quarters project (MNP LQ) project, west coast of India as per the terms and conditions of the contract MR/OW/MM/MNP-MLQ/16/2008 dated 16.10.2009. Oil and Natural Gas Corporation Ltd. (ONGC) will pay any duties, fines that may become payable in the event L T Sapura Shipping P. Ltd. does not comply with the terms of Notification 21/02-Cus dated 01.3.2002 as amended by Notification 26/03-Cus dt.01.03.2003 Sl.No. 214 of the table of import. The said undertaking c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sub-contractor if his name does not figure in the contract signed between the GOI and the Contractor on the ground that as per the condition of the exemption, the importer is required to produce a certificate from DG, Hydrocarbons, that the imported goods have been imported under a contract signed under the New Exploration Licensing Policy, and containing the name of such sub-contractor. 2.4.2 The condition (c)(i) in all the Sl. Nos. of the said notification requires that the importer should produce an EC, which should indicate that the goods have been imported under a contract entered between the Government and the contractor; and it should also contain the name of the sub-contractor. The requirement of containing the name of the subcontractor is in the EC issued by the DG Hydrocarbons and not in the original contract entered into by the contractor with the GOI. If the sub-contractor is required to enter into a contract with the GOI, then the condition viz an affidavit to the effect that such subcontractor is a bona-fide sub-contractor of the contractor would be superfluous. Moreover, at the time of entering into contract, the contractor normally does not know the name of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8905 10 00 - Dredgers U 10% 8905 20 00 - Floating or submersible drilling or production platforms U 10% 8905 90 - Other : U 10% 8905 90 10 - Floating docks U 10% 8905 90 90 - Other U 10% The finding of the Adjudicating Authority that the said vessel LTS 3000 merits classification under chapter 8905 is totally incorrect inasmuch the chapter heading starts with the clause that it covers light vessel, fire floats, dredgers, etc. the navigability of which is subsidiary to the main function. The understanding of the ld. Adjudicating Authority that vessel LTS 3000 having a crane fitted to it would fall under floating cranes seems to be incorrect as it is on record that vessel LTS 3000 is self navigating ocean going vessel. This fact is clearly ascertainable from the certificate of class as given by the Indian Register of Shipping which we rep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or submersible drilling or production platforms and all other vessels which perform their main function in a stationary position. On the contrary the vessel under import undertakes seismic survey of the sea bed and its subterranean surface in large area running into hundreds of square kilometres. Such survey vessels, cannot obviously perform the function if it remains in a stationary position. This is material and significant difference in the nature of the function undertaken by Geo Hind Sagar when compared with the vessels of CTH 8905. Further from the contracts entered into with ONGC and NACOR, it is seen that the vessel should possess significant navigational capability to undertake and perform the tasks assigned and there are specific standards laid down in this regard. If the vessel has to undertake the survey at constant speed and depth, its navigability cannot be said to be subsidiary to its main function and both are equally important. Further as per HSN Explanatory Note, vessels falling under CTH 8906 include scientific research vessels; laboratory ships, weather ships, etc., within its ambit. It is a settled position in law as held by the Honble Apex Court in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the impugned vessels do not fall under the purview of CTH 8905. The technical features of the vessels also indicate that these vessels are self-propelled and have modern navigation and communication systems installed. Even the contract given by the ONGC shows that these vessels have to undertake inspection, maintenance and repair functions over a 4000 Km area. Can a vessel without propulsion and navigational capability undertake such operations? Common sense gives the answer in the negative. But common sense is quite uncommon, as the popular saying goes. Thus we have no hesitation in our mind to conclude, after going through all the evidences available on record, that the impugned vessels are rightly classifiable under CRH 8901 of the Customs Tariff and not under CTH 8905 and we hold accordingly. 7.10 The appellants have also relied on the decision of? this Tribunal in the CGU Logistics v. CC, Mumbai reported in 2011 (274) E.L.T. 75 wherein the classification of a transshipment vessel was considered. The competing classifications were Headings 8901 and 8905 as in the present case. The vessel in that case was a self-propelled one with dedicated conveyor system in a station ..... 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