2014 (12) TMI 772 - AT - Customs

Import of Anchor-Handling Tug/Supply Vessel (AHTS) - Classification - Rate of duty - Inclusion of freight value @20% and insurance amount @1.125% to the goods - Held that - In view of the classification of the vessel by the Indian Register of Shipping as a supply vessel which is the competent authority for issue of certificate of class of vessels in India and also in view of the Chartered Engineer s certificate issued at the time of importation there is merit in the appellant s contention that the vessel would merit classification under CTH 8901. We also find that the American Bureau of Shipping has also classified the vessel as a supply vessel . Even if the vessel has a capacity to do anchor handling even then it would remain as a supply vessel as anchor handling feature is only as an additional facility and would not take away the vessel from the scope of a cargo vessel or a vessel which can transport persons. Valuation - Held that - As regards the re-determination of value we find that the Commissioner has adopted a rate of 21.125% of the cost towards freight and insurance. The appellant had given details of the expenditure incurred by them for the transport of the vessel from Dubai to India. In such a situation the Commissioner could not have added freight and insurance @21.125%. Since the vessel had come on its own motion only the actual cost of transportation incurred should have been added for determination of assessable value. As regards the confiscation and imposition of penalty we do not find any reason for the same. The vessel was examined by the Customs Officers along with a Chartered Engineer before its clearance was allowed. When the appellant claims a classification under CTH 8901 it is based on its understanding of the subject matter and the same cannot be treated as a mis-declaration as held by the hon ble apex Court in the case of Northern Plastic Ltd. vs. Collector of Customs & Central Excise 1998 (7) TMI 91 - SUPREME COURT OF INDIA . In the present case the vessel was boarded by the Customs officers and was examined. Thereafter the goods have been cleared accepting the declaration of the appellant. In such circumstances the question of mis-declaration would not arise at all. Therefore the wrong classification claimed by the appellant as held by the adjudicating authority with which we do not agree cannot be a reason for invoking the provisions of Section 111(m) for confiscating the goods and imposition of fine and penalty on the appellants. Such a unilateral action on the part of the department without any rhyme or reason cannot be sustained in law. - Decided in favour of appellant.

Summary

Issues: Classification of imported vessel under Customs Tariff Heading (CTH), Determination of value, Confiscation of vessel, Imposition of penalty

Classification of Vessel:
The appeal concerned the classification of an imported vessel, M.V. Viva, by the Commissioner of Customs as an 'Anchor-Handling Tug/Supply Vessel' (AHTS) under CTH 8904. The appellant argued that the vessel should be classified as a supply vessel under CTH 89.01 based on evidence from the Indian Register of Shipping and a Chartered Engineer's certificate. The Tribunal agreed with the appellant, noting the vessel's modifications and characteristics, determining it primarily as a supply vessel for carriage of cargo and persons, not a tug or towing vessel. The Tribunal referenced HSN Explanatory Notes and previous case law to support the classification under CTH 8901.

Determination of Value:
Regarding the re-determination of value, the Commissioner had added freight and insurance at 21.125% of the vessel's cost. The Tribunal disagreed with this approach, stating that only actual transportation costs should be considered for determining the assessable value. The appellant's evidence of transportation expenses was deemed relevant, leading to the conclusion that the Commissioner's calculation was incorrect.

Confiscation of Vessel and Imposition of Penalty:
The Commissioner had confiscated the vessel under Section 111(m) of the Customs Act, 1962, and imposed penalties on the appellant and its director. The Tribunal found no basis for confiscation or penalties, emphasizing that the vessel had been examined by Customs officers and no mis-declaration was evident. The Tribunal highlighted the appellant's classification claim under CTH 8901 as a matter of interpretation, not mis-declaration, citing legal precedent. The unilateral actions by the department were deemed unjustified and not legally sustainable. Consequently, the impugned order was set aside, and the appeal was allowed with appropriate relief.

This detailed analysis of the judgment provides a comprehensive overview of the issues involved, the arguments presented by both parties, and the Tribunal's reasoning leading to the final decision in favor of the appellant.