2011 (12) TMI 127 - AT - Central Excise

Classification of pleasure vessel designed & registered as pleasure vessel - Casino and entertainment activity - Held that - Vessel in question on one hand is classifiable as a cruise ship under heading 8901 and on the other hand it is classifiable as a vessel for pleasure under heading 8903. In such a situation the Rules for interpretation of the classification come into play. Since the Rule 1,2, & 3 (a) or (b) are not applicable in the present situation, it is found that under Rule 3(c) when the goods cannot be classified by reference to Rule 3 (a) & (b) they shall be classified under heading which occurs last in the numerical order among those which equally merit consideration. Therefore, it is more appropriately classifiable under heading 8903 of the Central Excise Tariff. Matter is remanded back to original authority for deciding issue relating to valuation of vessel, limitation whether there was any suppression of facts and imposition of penalty. - Decided in favor of Revenue

Issues Involved:
1. Classification of the vessel 'M.V. Caravela' under the Central Excise Tariff Act.
2. Determination of the appropriate heading for the vessel under the Central Excise Tariff.
3. Consideration of the vessel's intended use and design for classification.
4. Application of the Rules for Interpretation of the Schedule.
5. Examination of international definitions and practices for pleasure vessels.
6. Evaluation of the principle of Noscitur A Socciis.
7. Assessment of valuation, limitation, and imposition of penalties.

Issue-Wise Detailed Analysis:

1. Classification of the vessel 'M.V. Caravela' under the Central Excise Tariff Act:
The primary issue revolves around whether the vessel 'M.V. Caravela' should be classified under heading 8901 (Cruise ships, excursion boats, ferry-boats, cargo ships, barges, and similar vessels for the transport of persons or goods) or heading 8903 (Yachts and other vessels for pleasure or sports; rowing boats and canoes) of the Central Excise Tariff Act. The Revenue contends that the vessel is classifiable under heading 8903 as it is used for playing casino games and is designed for pleasure. Conversely, the respondents argue that the vessel is a cruise ship classifiable under heading 8901.

2. Determination of the appropriate heading for the vessel under the Central Excise Tariff:
The adjudicating authority initially classified the vessel under heading 8901, considering it a passenger vessel. However, the Revenue argues that the vessel is a floating casino intended for pleasure, not for transporting passengers. The vessel's advertisements and promotional materials also highlight its use as a floating casino, supporting the Revenue's classification under heading 8903.

3. Consideration of the vessel's intended use and design for classification:
The vessel was designed and manufactured by M/s. WSPL and leased to M/s. AHRIL, who retrofitted it for casino and entertainment purposes. The vessel is anchored in the Mandovi River and used for live casino gaming, indicating its primary use for pleasure rather than transport. The vessel's design includes facilities for casino gaming, which further supports its classification under heading 8903.

4. Application of the Rules for Interpretation of the Schedule:
The Rules for Interpretation of the Schedule play a crucial role in determining the classification. Rule 1 states that classification should be determined according to the terms of the headings and any relative Section or Chapter Notes. Rule 3(c) specifies that when goods cannot be classified by reference to Rule 3(a) or (b), they shall be classified under the heading which occurs last in numerical order among those which equally merit consideration. Applying these rules, the vessel is more appropriately classifiable under heading 8903.

5. Examination of international definitions and practices for pleasure vessels:
The respondents argue that the vessel does not fit the international definitions of pleasure vessels as defined in the UK, Australia, and Canada, which are typically privately owned and used for personal or corporate pleasure. However, the Indian Merchant Shipping Act does not incorporate these definitions, and the vessel is categorized as a special trade passenger ship under Indian law.

6. Evaluation of the principle of Noscitur A Socciis:
The principle of Noscitur A Socciis, which suggests that words should be interpreted in the context of surrounding words, was considered by the Commissioner. However, the Tribunal finds that the word "all" in the heading 8903's explanation indicates that all vessels used for pleasure or sports, regardless of size, fall under this heading. Therefore, the principle does not limit the classification to small sports vessels.

7. Assessment of valuation, limitation, and imposition of penalties:
Since the Commissioner did not address the issues of valuation, limitation, and imposition of penalties, the Tribunal remands the matter back to the original authority to decide on these aspects in accordance with the law and after providing an opportunity for the appellant to be heard.

Conclusion:
The Tribunal concludes that the vessel 'M.V. Caravela' is more appropriately classifiable under heading 8903 of the Central Excise Tariff as a vessel for pleasure or sports. The impugned order is set aside, and the matter is remanded back to the Commissioner for a decision on valuation, limitation, and penalties. The Revenue's appeal is allowed concerning the classification of the vessel.

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