Customs, Excise and Gold Tribunal - Mumbai
Kirloskar Oil Engines Ltd. vs Cce And C on 8 July, 2003
Equivalent citations: 2003(89)ECC173, 2003(156)ELT859(TRI-MUMBAI)
JUDGMENT Gowri Shankar, Member (T)
1. The appeal is taken up for disposal after waiving deposit.
2. The appellant was engaged in the manufacture of diesel internal combustion engine. The duty that has been demanded from, and penalty imposed on, the appellant relates to the supply of such engines manufactured and supplied to Goa Shipyard in the year 2000. The appellant cleared these goods without payment of any duty, claiming the benefit of the exemption contained in Entry 3 of the table to the Notification 64/95 as amended. This entry exempts from duty goods supplied as stores for consumption on board ships of the Indian navy or coast guard. Notice issued to the appellant demanded duty and proposed penalty on the ground that the engine that were supplied were not stores for consumption on board ships of the Indian navy or coast guard, but were in fact supplied to be fitted on to ships being constructed by Goa Shipyard for supply to navy or coast guard. The Commissioner has confirmed this view and imposed penalty.
3. It is contended by the appellant that engines were in fact supplied for fitment of ship. Counsel for the appellant relies upon the definition contained in Section 283A of the Merchant Shipping Act, of a new ship or new vessel as a "ship or vessel whose keel is laid or which is at a similar stage of construction on or after the material date as defined in Sub-section (2)". This section comes in Part X of the Act relating to safety and is only applicable to that part. Further, the provisions of the Merchant Shipping Act, which has been enacted to regulate matters relating to shipping, cannot be made use of in construing the terms of an exemption notification issued under Section 5A of the Central Excise Act. The contention that the Explanatory Notes to the Harmonised System of Nomenclature includes in heading of Chapter 89, dealing with ships and floating structures unfinished or incomplete vessels and hulls does not require any serious consideration. The notification does not describe the goods exempted by it in words employed in the tariff, The word "stores" has not been defined in the Central Excise Act. It would be appropriate to refer to allied act, Customs Act defined in Section 2(38) stores to mean "goods used in vessels or aircraft and includes fuels spare parts and other article whether or not for immediate fitting." Applying this definition, the goods that the appellant were clearly not Stores. They could not be used in a vessel or aircraft. That vessel or aircraft would come into existence only after the engine was fitted. A reference to spare parts in this definition makes it clear that stores were intended to cover spare parts and not the components. The benefit of the exemption is clearly not available.
4. We how turn to penalty. It is contended that penalty was not imposable because the appellant bona fide pleaded that the goods were meant for use on board the vessel on the navy or coast guard ship stores. Reliance is placed this purpose upon the Commissioner's conclusion that the extended period of limitation contained in proviso under Sub-section (11) and the provisions of Section 11AC of the Act will not apply because there was no suppression, misstatement of facts by the appellant. It is true that the Commissioner has found the extended period of limitation inapplicable. The notice issued to the appellant alleged that it had wrongly stated in the declaration furnished by it that the goods were meant for use as store despite being aware that it was not. Counsel for the applicant states that no declaration was filed and contends that the Commissioner is bound by the terms of the notice and if she finds that the notice was defective with regard to the applicability of extended period she could not impose penalty. We do not find it possible to agree. The notice alleged that from the purchase order and the discussions that the representatives of the appellant held with the representatives of the shipyard, it would have been clearly aware that the goods were meant for use in the construction of ships. The purchase orders do clearly indicate that to be the case. One of them that was produced refers to supply of main engine to yard 1180 which is stated to be under construction. It does not contain any material which suggests, let alone say, that the engine is intended for replacement of an existing engine on any particular ship. Clause 15 of the purchase order provides that the appellant would take full responsibility for satisfactory purpose of the equipment for a minimum period of 12 months "from the date of commissioning of ship and date of equipment of ship whichever is earlier." One of the purchase orders refers to the requirement to depute service engineering "in technical supervision, commissioning and trials as and when required by GSL." The value of each set consisting of each engine is about 30 crores. The appellant did not produce the tender notice or its offers in response thereto. It is difficult to believe that they did not in clear terms say that the engines were to be supplied for construction of ship; nor is counsel for the appellant able to deny that at the various meetings between the representatives of the appellant and buyer the fact that the goods were for to be used for construction ships by the buyer was made clear. It is absurd to accept that the appellant could have believed that the engines were not meant for use in construction of ships.
5. The certificate that the appellant relies upon issued by the coast guard is ambiguous. It says that the main engines are for fitment as store on board the Indian coast guard craft. However, we do not see why the appellant chose to rely upon the certificate in the face of is own knowledge that the goods were not for such use. The notification does not provide for production of such a certificate and there was no motive for the appellant to obtain the certificate The explanation offered by the counsel for the appellant that it took the certificate to protect itself is facile. Reliance upon the certificate in fact suggests that, despite its knowledge of the use of the goods, the appellant attempted to project a completely different and false position. Taking all aspects into account, we reduce the penalty to Rs. 20 lakhs.
6. Appeal allowed in part.