2013 (10) TMI 409 - AT - Customs

Import of second hand vessel - Exemption from duty - supply vessel or multipurpose support vessel - classification under heading 8905 or 8901 - Held that - vessel is designed to carry cargo and persons, is self-propelled and has navigational capability. From the details of the speed parameters, it can be seen that the vessel is not a stationary vessel even when delivering service. These parameters are very crucial for classification of the impugned vessels. The Revenue s reasons for classification under CTH 8905 is mainly based on two documents, namely, the permission given by the Indian Navy and the contract entered into by the appellants with the ONGC. The Naval Security Clearance is given by the Indian Navy from the security point of view and it has nothing to do with the classification of the vessel. As regards the contract with the ONGC, the said contract stipulates the various services to be rendered to them by the service provider. In the contract, the technical specifications of Multi-purpose Support Vessel are enumerated - technical paper makes it abundantly clear that Offshore support vessels are nothing but supply vessels for the supply of cargo and personnel to offshore platforms with additional features of underwater diving and inspection, fire-fighting operations, etc. The vessels under importation have some of these additional features so that they can perform the various operations that are required and expected of offshore support vessels. The contract given by ONGC requires certain operations to be performed in addition to supply and transport of cargo and personnel. Nevertheless, these vessels remain supply vessels designed for transport of cargo and persons and therefore, they are rightly classifiable under CTH 8901 and we hold accordingly. Extended period of limitation - Held that - The goods were examined by the Customs before assessment and all the type approval certificates given by the statutory authorities and the technical data relating to the vessels were made available to the customs authorities. The allegation of the customs is that the copies of the contract entered into with the ONGC were not made available. There is no statutory requirement for submission of contracts with ONGC to the customs authorities. The documents required to be submitted at the time of filing of the bill of entry are only invoices /purchase orders for the goods, product literature/catalogue applicable to the goods. In the case of vessels, the registration and class certificates are also required to ascertain the nature of the vessels. All these documents were submitted by the appellants at the time importation. How the vessels would be put to use or is there any contract for the future use of the imported goods are not relevant considerations for assessment of customs duty. Therefore, we hold that the entire demand is time barred and on that ground also the customs duty demands fail. Once the classification claimed by the appellants is upheld, the question of differential duty demand, confiscability of the goods, and imposition of penalty, etc. do not sustain and we accordingly set aside the same - Decided in favour of assessee.

Summary

Issues Involved:
1. Classification of imported vessels.
2. Alleged misdeclaration and suppression of information by the importers.
3. Determination of assessable value.
4. Demand for differential duty and interest.
5. Confiscation and imposition of penalties.
6. Applicability of extended period for demand under section 28(1) of the Customs Act, 1962.
7. Time-barred nature of the demand.

Issue-wise Detailed Analysis:

1. Classification of Imported Vessels:
The primary issue revolves around the correct classification of the imported Multi-purpose Support Vessels (MSVs) by M/s HAL Offshore and M/s Great Offshore Ltd. The appellants classified the vessels under CTH 8901 9000, claiming them as 'supply vessels' with a Nil duty rate. The customs authorities, however, reclassified them under CTH 8905, arguing that the vessels were specialized for functions like fire-fighting, diving support, and underwater inspection, making their navigability subsidiary to their main function.

2. Alleged Misdeclaration and Suppression of Information:
The customs authorities alleged that the importers misdeclared the nature of the vessels and suppressed their multifunctional capabilities to evade customs duty. The investigations revealed that the vessels were equipped with specialized equipment for underwater inspection, fire-fighting, and maintenance, contrary to the importers' declaration as simple supply vessels.

3. Determination of Assessable Value:
For M/s HAL Offshore, an additional allegation was made regarding the misdeclaration of the vessel's value by not including the cost of modifications and saturation diving systems worth USD 8.4 million. This led to the redetermination of the assessable value and subsequent differential duty demand.

4. Demand for Differential Duty and Interest:
Based on the reclassification and redetermination of assessable value, the customs authorities issued show cause notices demanding differential duty of Rs. 15,50,78,867 for M/s HAL Offshore and Rs. 20,18,53,270 for M/s Great Offshore Ltd. Interest on the differential duty was also demanded under section 28AB of the Customs Act, 1962.

5. Confiscation and Imposition of Penalties:
The show cause notices proposed the confiscation of the goods under section 111(m) and the imposition of penalties under sections 112(a) and 114A of the Customs Act, 1962, on the importers and their officials for the alleged misdeclaration and evasion of duty.

6. Applicability of Extended Period for Demand:
The customs authorities invoked the extended period under section 28(1) of the Customs Act, 1962, for issuing the demand notices, citing the suppression of material facts by the importers regarding the multifunctional capabilities of the vessels.

7. Time-barred Nature of the Demand:
The appellants contended that the demand was time-barred as the vessels were examined and assessed by customs at the time of importation, and the show cause notices were issued after more than six months from the date of original assessment. They argued that there was no statutory requirement to submit contracts with ONGC to customs, and all necessary documents were provided during importation.

Judgment:
The Tribunal analyzed the scope of the relevant tariff entries, particularly CTH 8901 and 8905. It concluded that the imported vessels were essentially 'supply vessels' with unrestricted navigation capabilities, despite being equipped for additional functions like underwater inspection and fire-fighting. The Tribunal held that the vessels were rightly classifiable under CTH 8901, as their primary function was the transport of cargo and personnel, and navigation was not subsidiary to their main function.

The Tribunal also found that the demand for differential duty was time-barred, as all relevant documents were submitted at the time of importation, and there was no statutory requirement to submit contracts with ONGC. Consequently, the Tribunal set aside the duty demands, confiscation orders, and penalties, allowing the appeals with consequential relief.

Conclusion:
The Tribunal's judgment emphasized the importance of accurate classification based on the primary function of the vessels and upheld the appellants' classification under CTH 8901. It also highlighted procedural aspects, such as the time-barred nature of the demand, leading to the dismissal of the customs authorities' claims.