2006 (2) TMI 460 - AT - Customs

Confiscation and penalty - Ship stores - Barge welded with diving equipment - Words and phrases

Summary

Issues Involved:

1. Classification of the barge and associated diving equipment.
2. Liability of diving equipment to customs duty.
3. Status of diving equipment as ship stores.
4. Confiscation and duty liability under the Customs Act, 1962.
5. Penalty and redemption fine imposed.

Detailed Analysis:

1. Classification of the barge and associated diving equipment:
The primary issue was whether the diving equipment welded onto the barge REGINa-250 should be classified under Heading 8901.90 or 8905.20. The Deputy Commissioner classified the barge under Heading 8905.20 as "floating or submersible drilling or production platform," which was not exempt from duty. However, it was found that the barge did not primarily contain equipment for drilling, thus it did not fall under Heading 8905.20. Instead, the barge was more appropriately classified under Heading 8901.90, which includes various kinds of barges.

2. Liability of diving equipment to customs duty:
The Commissioner determined that the diving equipment was not part of the vessel and thus liable to duty. However, this finding was contested, as the equipment was welded to the barge and used for its operations. The appellate tribunal found that the equipment, whether welded or not, should be considered part of the ship stores under Section 2(38) of the Customs Act, 1962, and thus exempt from duty under Section 86(1).

3. Status of diving equipment as ship stores:
It was argued that the diving equipment should be considered ship stores, as defined under Section 2(38) of the Customs Act, 1962, which includes goods for use in a vessel. The tribunal agreed, stating that the equipment was used on the barge and thus qualified as ship stores, exempt from duty while onboard.

4. Confiscation and duty liability under the Customs Act, 1962:
The Commissioner had ordered the confiscation of the barge and imposed duty and penalties under Sections 111(d), (f), (i), and 115 of the Customs Act, 1962. The tribunal found no evidence of any prohibition or concealment of the equipment to justify confiscation under Section 111(d) or (i). Furthermore, since the equipment was not concealed and did not require a bill of entry, the confiscation under Section 111(l) was also not upheld. Consequently, the confiscation of the barge under Section 115 was invalidated.

5. Penalty and redemption fine imposed:
Given that the confiscation and duty demands were not upheld, the penalties under Sections 112 and 114A, as well as the redemption fine, were also found to be unjustified. The tribunal set aside these penalties and fines.

Conclusion:
The tribunal concluded that the diving equipment welded onto the barge REGINa-250 should be classified as ship stores and thus exempt from customs duty. The confiscation of the barge and the imposition of duty and penalties were found to be unsustainable. The order of the Commissioner was set aside, and the appeals were allowed.