Custom, Excise & Service Tax Tribunal
Lewek Altair Shipping Private Limited vs Vijayawada on 9 January, 2019
(1) Appeals No. C/30608/2017, C/30609/2017,
C/30230/2016, C/30234/2016
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
REGIONAL BENCH AT HYDERABAD
Division Bench
Court - I
Appeal No. Appellant Respondent Impugned Order No. &
Date C/30608/2017 Lewek Altair Shipping CC, Vijayawada O-I-O No. VJD-CUSTM-
Pvt. Ltd. PRV-CM-030-15-16, dated
31.12.2015 passed by CC
(Preventive) Vijayawada
C/30609/2017 .do. CC, Vijayawada O-I-O No. VJD-CUSTM-
PRV-CM-031-15-16, dated
31.12.2015 passed by CC
(Preventive) Vijayawada
C/30230/2016 CC, Vijayawada Lewek Altair Shipping O-I-O No. VJD-CUSTM-
Pvt. LTd. PRV-CM-031-15-16, dated
31.12.2015 passed by CC
(Preventive) Vijayawada
C/30234/2016 CC, Vijayawada Lewek Altair Shipping O-I-O No. VJD-CUSTM-
Pvt. Ltd. PRV-CM-030-15-16, dated
31.12.2015 passed by CC
(Preventive) Vijayawada
Appearance
Shri Prakash Shah, Advocate for the Appellant Assessee. Shri N. Bhanu Kiran, Asst. Commissioner/AR for the Respondent. Coram:
Hon'ble Mr. M.V. RAVINDRAN, MEMBER (JUDICIAL) Hon'ble Mr. P.V. SUBBA RAO, MEMBER (TECHNICAL) Date of Hearing: 09.01.2019 Date of Decision: 09.01.2019 FINAL ORDER No. A/30053 - 30056/2019 [Order per: Mr. P. Venkata Subba Rao)
1. All these appeals pertain to the same issue and hence are being disposed of together. Appeal No. C/30608 /2017 and C/30609/2017 have (2) Appeals No. C/30608/2017, C/30609/2017, C/30230/2016, C/30234/2016 been filed by the assessee against the order of the Commissioner of Customs, classifying the vessels which they imported under the Customs Tariff Heading 8905 90 90and denying the benefit of exemption notification.
They also challenged the confiscation of the vessels imported by them under section 111(m) and imposition of penalties under section 112 (a) and 114AA of the Customs Act, 1962. The Department's appeals No. C/30230/2016 and C/30234/2016 are against the impugned orders on the ground that the Commissioner has imposed a meagre amounts of redemption fine under section 112 (a) which is less than 1% of the value of the vessels and this needs to be enhanced.
2. Heard both sides and perused the records. The facts of the case in brief are that assessee imported vessels "Lewek Altair" and "Lewek Atlas"
and filed Bills of Entry, classifying them under chapter heading 8901 9000of Customs Tariff and claimed the benefit of Exemption Notification No. 12/2012-Cus, dated 17.03.2012 as amended. These vessels are meant to support oil rigs of ONGC in their offshore drilling platforms. The vessels in question are used to transport personnel and equipment from shore to the platform and back. It is the case of the Revenue that such vessels are to be correctly classifiable under Customs Tariff Heading 8905 9000 and are not eligible for exemption under notification No. 12/2012-Cus, dated 17.03.2012. It is the case of the appellant assessee that the vessels are classifiable under CTH 89019000 and are eligible for exemption under notification No. 12/2012-Cus, dated 17.03.2012 (S.NO. 461).
(3) Appeals No. C/30608/2017, C/30609/2017, C/30230/2016, C/30234/2016 Consequently there is a demand of customs duty along with interest as applicable under Section 28AA. It is also the case of the department that the appellant herein has misclassified the goods in question and therefore the goods in question do not correspond in relation to the classification in the bill of entry. Therefore, there is a violation of Section 111 (m) of the Customs Act and are therefore the imported vessels are liable to be confiscated. It is further the case of the Revenue that appellant is liable to penalty under section 112 (a) of the Customs Act, 1962 as well as under
section 114AA of the Customs Act. The appellant contests the confiscation of the vessels as well as imposition of penalties under sections 112(a) and 114AA. Show cause notices were issued to the appellant and after following due process, Ld. Commissioner vide the impugned orders classified the vessels under CTH 8905 9090 and denied the benefit of exemption notification No. 12/2012-Cus. He accordingly ordered finalisation of the provisional assessment as above and demanded duty along with applicable rate of interest. He further confiscated the goods under section 111(m) as the entry of classification in the Bill of Entry filed by the appellant is not reflecting the correct classification. He allowed redemption of the vessels on payment of redemption fine and imposed penalties under Section 112 (a) and 114 AA. Hence these appeals by the assessee.
3. Ld. Counsel for the appellant submits that vessels in question are meant for transporting personnel and equipment from shore to off shore (4) Appeals No. C/30608/2017, C/30609/2017, C/30230/2016, C/30234/2016 platform of ONGC where the rigs are located and back and this function of the vessels is not in dispute. He draws the attention of the Bench to the two conflicting entries in the Customs Tariff Heading i.e. 8901 and 8905 which are as follows:
Tariff Item Description of goods Unit Rate of duty Standard Preferential areas (1) (2) (3) (4) (5) 8901 CRUISE SHIPS, EXCURSION BOATS , FERRY-BOATS, CARGO SHIPS, BARGES AND SIMILAR VESSELS FOR THE TRANSPORT OF PERSONS OR GOODS 8901 10 Cruise ships, excursion boats and similar vessels principally designed for the transport of persons;
ferry-boats of all kinds :
8901 10 10 Ships u 10% -
8901 10 20 Launches u 10% -
8901 10 30 Boats u 10% -
8901 10 40 Barges u 10% -
8901 10 90 Other u 10% -
8901 20 00 Tankers u 10% -
8901 30 00 Refrigerated vessels, other than those of Sub- u 10% -
heading 8901 20
8901 90 00 Other vessels for transport of the goods and other u 10% -
vessels for the transport of both persons and
goods
8905 LIGHT-VESSELS, FIRE-FLOATS, DREDGERS,
FLOATING CRANES, AND OTHER VESSELS THE
NAVIGABILITY OF WHICH IS SUBSIDIARY TO THEIR
MAIN FUNCTION; FLOATING DOCKS; FLOATING
OR SUBMERSIBLE DRILLING OR PRODUCTION
PLTFORMS
8905 10 00 Dredgers u 10% -
8905 20 00 Floating or submersible drilling or production u 10% -
platforms
8905 90 Other :
8905 90 10 Floating docks u 10% -
8905 90 90 Other u 10% -
4. He would argue that the primary function of the vessels being to carry persons and equipments, they cannot be classified under 8905 but have to be classified under Chapter Heading 8901 9000. Chapter Heading 8905 (5) Appeals No. C/30608/2017, C/30609/2017, C/30230/2016, C/30234/2016 basically covers such vessels whose function is not navigation but is some other function and navigability is only a subsidiary function, whereas Chapter Heading 8901 covers such vessels which are primarily meant for transport of persons and goods. It is not necessary for the vessels falling under 8901 to carry passengers and goods to travel very large distances or carry persons or goods from one port to another. What is important is that they carry persons and goods as their primary function whereas the vessels falling under chapter heading 8905 have other functions such as dredging work, float cranes, fire floats etc. and their navigation is only incidental. He draws the attention of the Bench to the findings of Hon'ble Commissioner of Customs in paras 30, 31, 32 & 36 in O-I-O No. VJD-CUSTM-PRV-CM-030- 15-16, dated 31.12.2015 which are as follows:
(6) Appeals No. C/30608/2017, C/30609/2017, C/30230/2016, C/30234/2016 the Department that the primary function of the vessel was not transport of goods and personnel and the classification adopted by them is in fact not correct.
(7) Appeals No. C/30608/2017, C/30609/2017, C/30230/2016, C/30234/2016
5. He thus submits that Commissioner took a view that the vessels in question are not commercially viable to transport the goods to long distances and are meant for platform supply and operations only. He further held that the dynamic positioning system located in the vessels is the primary function which gets fulfilled at a stationary position and therefore the vessels are not meant for carrying goods and passengers. Ld. Counsel would submit that the dynamic positioning system enables the supply vessel to be in a stable condition when the goods or passengers are being loaded or off loaded at the oil platform in the sea. This loading or unloading is not an end in itself but is a means to enable their transport to the shore and back. He would argue that the navigation is therefore the primary function of the vessels and they are classified under Tariff 8901 9000 and not under 8905 as held by Ld. Commissioner.
6. Ld. DR, on the other hand, would argue that the vessels in question are not ordinary boats meant for transport of goods or persons but for platform support vessels whose primary function is to support the platform of oil rig in the high sea. On a specific query from the Bench as to how the platform is supported by vessels in question, Ld. DR would say that by the dynamic positioning system at the platform and by carrying personnel and goods within the shore and the platform. He further argue that the vessels (8) Appeals No. C/30608/2017, C/30609/2017, C/30230/2016, C/30234/2016 in question are incapable of carrying personnel and equipment to different Ports or over long distances as has been admitted by the Master of the Vessels in his statement before the Customs Officer. Therefore, the navigation of the vessels is secondary to the primary function of the vessels namely supporting the oil rig platforms.
7. We have considered the arguments on both sides and perused the records including the statement by the Master of the vessel. The vessels in question are meant to support the ONGC's oil drilling platform and were imported as such. The next question is how the vessels support the platform. As is evident from all available documents that the vessels carry out this function by carrying personnel and equipment from shore to the platform and back. Such a function is essential for the off shore oil drilling platforms which are located far away from the shore. In such a factual matrix, we are unable to hold that the navigation of the vessels is not the primary function. We find that navigation indeed, is the primary function of the vessels and dynamic positioning system helps to perform this function efficiently. Similarly, loading or unloading goods or embarking or disembarking personnel are incidental to the transportation. Therefore, the vessels in question are rightly classifiable under Customs Tariff Heading 8901 9000 as claimed by the appellant. Thus, in our view, the vessels cannot, by any stretch of imagination, fall under CTH 8905. Consequently the benefit of exemption notification No. 12/2012-Cus is also admissible to the appellant. The demand of duty under CTH 8905 9090 denying the (9) Appeals No. C/30608/2017, C/30609/2017, C/30230/2016, C/30234/2016 benefit of exemption notification No. 12/2012-Cus, dt. 17.03.2012 by Ld. Commissioner needs to be set aside and we do so. Consequently, no interest is also payable on such demand. We find that confiscation of vessels under section 111(m) was only on the ground that the bill of entry claimed under Customs Tariff Heading which, according to the Commissioner, was incorrect. It was therefore held that in the entry made under Customs Act viz; Bill of Entry, the Customs Tariff Heading was not correct and therefore the goods are liable to be confiscated under section 111 (m). As we have held that the goods in question are classifiable as claimed by the appellant, under CTH 8901 9000, this allegation does not survive. Even otherwise, we find it hard to hold that an assessee who filed bill of entry with a Customs Tariff Heading which is not correct, will render his goods liable to confiscation under section 111 (m). The Customs Tariff Heading indicated in the bill of entry is only a self assessment by the appellant as per his understanding which is subject to re-assessment by the officers if necessary. Therefore, an assessee, not being an expert in the customs law can claim a wrong tariff or an ineligible exemption notification and such claim does not make his goods liable to confiscation. It is a different matter if the goods have been described wrongly or the value of the goods has been incorrectly declared. In this case, although there was an allegation in the show cause notice that the invoices were initially submitted for a lower value and thereafter were revised for higher amount, the confiscation in the impugned orders were only on the ground that CTH in the bill of entry was incorrect. In our view, this cannot form the basis for (10) Appeals No. C/30608/2017, C/30609/2017, C/30230/2016, C/30234/2016 confiscation of goods under section 111(m). Therefore, the confiscations and the redemption fines need to be set aside and we do so. Consequently no penalties are imposable under section 112 (a). As far as the penalties under section 114AA are concerned, these are imposable if a person knowingly or intentionally makes, signs or uses or causes to be made, signed or used, in a declaration, statement or document which is false or incorrect in any material particular, in the transaction of any business for the purpose of the Customs Act. Ld. Commissioner held "considering the facts of the case, it has to be held that on the ground of wilful misstatement regarding classification and availing of notification, I am constrained to hold that the importer is liable for penalty under section 114AA of the Customs Act, 1962." Thus holding, he imposed a penalty of Rs. 1.00 Crore on the appellant in each of the impugned orders. In our considered view, claiming an incorrect classification or the benefit of an ineligible exemption notification does not amount to making a false or incorrect statement because it is not an incorrect description of the goods or their value but only a claim made by the assessee. Thus, even if the appellant makes a wrong classification or claims ineligible exemption, he will not be liable to penalty under section 114AA of the Customs Act, 1962. Further, in these cases, we have already upheld the classification claimed by the appellant and therefore find that no penalty is imposable on the appellant.
8. In conclusion, the appeals filed by the assessee are allowed and Revenue's appeals seeking enhancement of the redemption fine are (11) Appeals No. C/30608/2017, C/30609/2017, C/30230/2016, C/30234/2016 rejected. The impugned orders are set aside with consequential relief to the assessee.
9. The impugned orders are set aside and the appeals of the appellant assessee are allowed with consequential relief. Revenue's appeals are rejected.
(Operative portion of the order pronounced in open court on conclusion of hearing) (P.VENKATA SUBBA RAO) (M.V. RAVINDRAN) MEMBER (TECHNICAL) MEMBER (JUDICIAL) vrg