2007 (3) TMI 466 - AT - Customs

Summary

Issues:
1. Classification of a vessel for ship breaking under Tariff Heading 8908.00.
2. Determination of duty and penalty for ship breaking activities.
3. Interpretation of ship breaking process and classification under Tariff Heading 8901.
4. Legality of demand of duty invoking extended period of limitation.

Analysis:
1. The case involved the import of a vessel for ship breaking under an agreement. The appellant removed various parts and components of the vessel, including machinery and equipment, while leaving the cement packing plant intact. The Customs officers assessed the vessel and charged duty under Tariff Heading 8908.00. The appellant argued that the cement packing plant, which was not fully dismantled, should not be considered a ship under Tariff Heading 8901, thus challenging the duty imposed.

2. The Commissioner issued a show cause notice, considering the partially broken vessel as falling under Tariff Heading 8901, demanding differential duty and penalties. The appellant contended that they had undertaken ship breaking activities as per the agreement, and the demand for duty and penalties, especially invoking the extended period of limitation, was not justified due to no suppression or misstatement.

3. The Tribunal analyzed the concept of ship breaking, noting that a ship brought for breaking is not sea-worthy. Despite the vessel being partially broken and the cement packing plant remaining intact, the Tribunal held that the vessel had undergone ship breaking as major components were removed. The Tribunal emphasized that the cement packing plant, even if not fully dismantled, did not prevent the ship breaking process. The Tribunal concluded that the partially broken vessel, with the cement packing plant, did not qualify as a vessel under Tariff Heading 8901, leading to the reversal of the Commissioner's decision.

4. Ultimately, the Tribunal set aside the Commissioner's order, allowing the appeals and providing consequential relief. The judgment clarified the interpretation of ship breaking activities and the classification of vessels under different tariff headings, resolving the dispute regarding duty imposition and penalties in the context of the vessel's transformation for sale.