2015 (2) TMI 738 - AT - Customs

Classification of vessel- Seismographic research vessel or Light vessels, fire floats etc. - NOSITUR A SOCIIS - Held that - According to HSN Explanatory Notes, heading 8905 covers vessel which perform their main function in a stationary position. The vessels covered by the said entry include light vessels, fire-floats, dredgers, floating cranes, floating docks; floating or submersible drilling or production platforms and all other vessels which perform their main function in a stationary position. On the contrary the vessel under import undertakes seismic survey of the sea bed and its subterranean surface in large area running into hundreds of square kilometres. Such survey vessels can not obviously perform the function if it remains in a stationary position. This is a material and significant difference in the nature of the function undertaken by Geo Hind Sagar when compared with the vessels of CTH 8905. Further from the contracts entered into with ONGC and NACOR, it is seen that the vessel should possess significant navigational capability to undertake and perform the tasks assigned and there are specific standards laid down in this regard. If the vessel has to undertake the survey at constant speed and depth, its navigability can not be said to be subsidiary to its main function and both are equally important. Further as per HSN Explanatory Note, vessels falling under CTH 8906 include scientific research vessels; laboratory ships, etc. within its ambit. It is a settled position in law as held by the hon ble apex court in the case of Wood Craft Products Ltd. 1995 (3) TMI 93 - SUPREME COURT OF INDIA that for resolving any dispute relating to tariff classification, a safe guide is the internationally accepted nomenclature emerging from the HSN. Revenue has placed reliance on the principle of NOSITUR A SOCIIS. As per this principle, entries in the schedule of sales tax and excise statute list some articles separately and some articles are grouped together; when they are grouped together, each word in the entry draws colour from the other words, therein. If we apply above principle to the fact of the present case, heading 8905 refers to light vessels, fire-floats, dredgers, floating cranes, floating docks; floating or submersible drilling or production platforms and other vessel navigability of which is subsidiary to the main function. IN other words what can come under CTH 8905 are only such vessels whose navigability is subsidiary to its main function. As observed in the preceding para, this condition is not satisfied in the present case and therefore, this principle has no application whatsoever to the facts obtaining herein. In our considered view, CTH 8906 which covers scientific research vessels is the most appropriate classification in respect of a seismic research vessel. Since there is no duty liability on the vessels falling under CTH 8906, the entire custom duty demand confirmed in the impugned order completely fails. Decided in favour of appellant.

Summary

Issues Involved:
1. Classification of the vessel "Geo Hind Sagar."
2. Imposition of customs duty and penalties.
3. Arguments regarding the vessel's classification under CTH 8905 vs. CTH 8906.
4. Role and responsibility of the CHA, its agents, and the Surveyor of the Indian Register of Shipping.
5. Application of the principle of NOSITUR A SOCIIS.
6. Validity of the penalties imposed on various appellants.

Detailed Analysis:

Classification of the Vessel "Geo Hind Sagar":
The primary issue revolves around the classification of the vessel "Geo Hind Sagar." The appellant contended that the vessel should be classified under CTH 8906 as a "Seismographic Research Ship," attracting a 'nil' rate of duty. The vessel is equipped with specialized seismic research equipment and navigational tools necessary for conducting seismic surveys over extensive areas. The classification under CTH 8905 was disputed as it pertains to vessels whose navigability is subsidiary to their main function, which is not the case for "Geo Hind Sagar."

Imposition of Customs Duty and Penalties:
The adjudicating authority had confirmed a customs duty demand of Rs. 9,24,04,082/- along with interest, classifying the vessel under CTH 8905 as a "Seismic Survey Vessel." Penalties were imposed on various appellants under different sections of the Customs Act.

Arguments Regarding the Vessel's Classification:
The appellant argued that the vessel should be classified under CTH 8906 based on its function and equipment. The vessel's navigability is crucial for its seismic survey operations, which involve continuous movement. The HSN Explanatory Notes support the classification of scientific research vessels under CTH 8906. Various certificates and contracts, including those from the Indian Registry of Shipping and Det Norske Veritas, classified the vessel as a "Seismographic Research Ship."

Role and Responsibility of the CHA, Its Agents, and the Surveyor:
The CHA and its agents argued that they acted based on the documents and instructions provided, classifying the vessel under CTH 8906. The Surveyor of the Indian Register of Shipping contended that his role was limited to surveying the vessel and classifying it based on the request received, without any statutory obligation under the Customs Act.

Application of the Principle of NOSITUR A SOCIIS:
The Revenue argued that seismic vessels should be classified under CTH 8905 by applying the principle of NOSITUR A SOCIIS, which groups similar articles together. However, the tribunal found this principle inapplicable as the vessel's navigability is not subsidiary to its main function, unlike the vessels listed under CTH 8905.

Validity of the Penalties Imposed:
The tribunal found no basis for the penalties imposed on the appellants. The vessel's classification under CTH 8906 was deemed appropriate, nullifying the customs duty demand and associated penalties. The tribunal also criticized the penalty on the Surveyor of the Indian Register of Shipping as an abuse of statutory powers, directing the CBEC and the Chief Commissioner of Customs to prevent such misuse of quasi-judicial powers.

Conclusion:
The tribunal set aside the impugned order, allowing the appeals with consequential relief. The vessel "Geo Hind Sagar" was classified under CTH 8906, attracting no customs duty. The penalties imposed on the appellants were found unsustainable in law and were accordingly set aside. The tribunal emphasized the need for proper guidelines to prevent misuse of quasi-judicial powers by customs authorities.