Customs, Excise and Gold Tribunal - Mumbai
Alang Marine Ltd. vs Commissioner Of C. Ex. And Customs on 24 August, 2006
ORDER
Jyoti Balasundaram, Vice-President
1. The above appeal arises out of the order of the Commissioner of Customs & Central Excise, Rajkot, confirming customs duty demand of Rs. 75,03,406/- under Section 28 read with Section 72 together with interest @ 24% p.a. under Section 28AA of the Customs Act by denying the benefit of duty free clearance in terms of notification 16/2000-Cus. dated 1-3-2000 to goods covered by bills of entry No. 4/2000-2001 and 5/2000-2001 both dated 25-1-2001, covering "Hull of mini bulk carrier and tug and pusher craft".
2. The brief facts of the case are that the appellants who are engaged in the activity of ship building had been granted licence for private bonded warehouse under Section 58 of the Customs Act for storage of goods without payment of duty on first importation. Permission was also granted for manufacture/repair/engineering works of ocean going vessels from imported as well as indigenous raw materials in customs bond, under Section 65 by the Assistant Commissioner of Customs, Bhavnagar, on 22-6-1995, subject to the provisions of the Act and Rules made thereunder and the supplementary Rules framed under Capital Goods Manufacture and Other Operations in the Warehouse Regulations 1966. They had been granted central excise registration under Rule 174 of the Central Excise Rules for manufacture of ocean going vessel falling under Chapter 89 of the Schedule to the Central Excise Tariff Act, 1985. They filed two ex-bond bills of entry for clearance for home consumption for hull of mini bulk carrier and hull of tug and pusher craft falling under CTH 8906.00 under the provisions of Section 68 of the Customs Act claiming exemption from duty under notification 16/2000-Cus. dated 1-3-2000. The department was of the view that a hull was not a ship or vessel and since licence was granted to the appellants only for manufacture of ocean going ships/vessels, the goods were not eligible for clearance at nil rate of duty under the notification. The department was of the further view that the appellants had not utilised various raw materials/goods imported by them for the intended purpose viz. manufacture of declared product, i.e. ocean going vessels and, therefore, for this reason also, exemption under the above mentioned notification was not admissible. On this basis show cause notice dated 22-6-2001 was issued seeking to disallow duty free clearance and seeking to recover duty on the goods covered by the two bills of entry above mentioned. The demand was confirmed by the Commissioner. Hence this appeal.
3. We have heard both sides.
4. We find that the permission under Section 65 was for the manufacture/assembly/fittings of parts mentioned in schedule A to the said permission. At Sr.No. 68 of schedule A, Hull classifiable under Chapter Heading 89.06 is specifically included. Therefore, what has been manufactured by the appellants was in terms of the permission granted under Section 65 which has been wrongly denied the benefit of exemption on the ground that the application under Section 65 was for manufacture of ocean going vessel. What is relevant for determining the appellants' eligibility to the exemption is fulfilment of the licence conditions. The application made by the appellants on 5-6-2001 clearly stated that what was intended to be manufactured was a Hull by using indigenous/imported raw material and the application also stated that the appellant-company would carry out manufacturing, repairs/engineering work of ocean going vessels etc. Therefore, we cannot hold, as the Revenue has, that the permission sought by the appellants was only for manufacture of ocean going vessel. Even otherwise, Hull is also a vessel as it is classifiable under Customs Tariff Heading 89.06 which covers "Other vessels, including warships, lifeboats other than rowing boats." In the case of Menor Floatel Ltd. v. CC the Tribunal has held that a Hull is an ocean going vessel as it is undisputedly a vessel and, therefore, capable of being navigated/plied in an ocean.
5. The other reason assigned by the Revenue for denial of the benefit of the notification, namely that the licence period prescribed under Section 65 had expired, is not only beyond the scope of the show cause notice which did not contain any such allegation but is also factually incorrect for the reason that the licence had been extended from time to time and was valid till 20-6-2006. The submission of the learned DR that duty is chargeable on Hull, cannot be accepted for the reason that in the present case no duty demand was raised on the Hull and, therefore, we are not required to record any finding on the dutiability thereof.
6. In the light of the above discussion, we hold that the goods in question namely raw materials/parts used in the manufacture of Hull are eligible to the benefit of exemption from customs duty under notification 16/2000 as per Sr. No. 299 of the table thereto, and hence set aside the impugned order and allow the appeal.
7. The cross-objection is also disposed of accordingly.