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2016 (7) TMI 645 - AT - CustomsClassification - import of heavy duty crane cum pipe laying ship - self propelled ship or not - classifiable as vessel under CTH 89 05 or not - Held that - The finding of the Adjudicating Authority that the said vessel LTS 3000 merits classification under chapter 8905 is totally incorrect inasmuch the chapter heading starts with the clause that it covers light vessel, fire floats, dredgers, etc. the navigability of which is subsidiary to the main function. The understanding of the ld. Adjudicating Authority that vessel LTS 3000 having a crane fitted to it would fall under floating cranes seems to be incorrect as it is on record that vessel LTS 3000 is self navigating ocean going vessel. In our view the classification of the vessel LTS 3000 under 8905 by the revenue authorities is totally incorrect. - We are fortified in this view by the HSN explanatory notes to chapter 8905, which states that the vessels covered under this heading normally function or perform other main function in a stationary position. In the case in hand, it is admitted fact that the vessel is continuously moving while laying the pipes and undertaking any operation in relation to the petroleum exploration. In our considered view, the classification of the vessel LTS 3000 would be correct under 8901 or 8906 but not definitely under 8905 as has been held by the Adjudicating Authority. If the classification of the vessel falls under chapter heading 8901 or 8906, the duty liability is nil is undisputed. - Demand set aside - Decided in favor of assessee.
Issues Involved:
1. Classification of the vessel LTS 3000. 2. Eligibility for the benefit of Notification 21/02-Cus at Sr. No. 214. 3. Validity of penalties imposed and confiscation of the vessel. Issue-Wise Detailed Analysis: 1. Classification of the Vessel LTS 3000: The primary issue was whether the vessel LTS 3000 should be classified under CTH 8901 or 8906, as claimed by the appellant, or under CTH 8905, as held by the Adjudicating Authority. The Tribunal found that the vessel LTS 3000 is a self-propelled ocean-going vessel used for laying underwater pipes on the ocean bed, which requires continuous navigation. The Tribunal noted that the vessel's navigability is not subsidiary to its main function, as required for classification under CTH 8905. The Indian Register of Shipping classified the vessel as a cargo ship, further supporting its classification under CTH 8901 or 8906. The Tribunal relied on previous judgments, including HAL Offshore Ltd. and J.M.Baxi & Co., which established that vessels with primary navigation functions should not be classified under CTH 8905. The Tribunal concluded that the vessel LTS 3000 should be classified under CTH 8901 or 8906, both of which carry a nil rate of duty. 2. Eligibility for the Benefit of Notification 21/02-Cus at Sr. No. 214: The Adjudicating Authority denied the benefit of Notification 21/02-Cus, arguing that the main appellant was not a sub-contractor of ONGC. However, the Tribunal found that ONGC had always considered the main appellant as a sub-contractor, as evidenced by affidavits and the Essentiality Certificate issued by the Directorate General of Hydrocarbons (DGH). The Tribunal noted that the Essentiality Certificate, which certified that the vessel was required for petroleum operations, was affirmed by the High Court of Bombay. The Tribunal also referred to a CBEC Circular dated 16.05.2013, which clarified that non-mention of the sub-contractor's name in the agreement between the contractor and the Government of India should not be a ground for denying the benefit of the exemption. The Tribunal concluded that the main appellant met all the conditions of the notification and was eligible for the benefit of Notification 21/02-Cus at Sr. No. 214. 3. Validity of Penalties Imposed and Confiscation of the Vessel: Given the Tribunal's findings on the classification and eligibility for the benefit of the notification, the confiscation of the vessel and the penalties imposed were deemed unsustainable. The Tribunal noted that the vessel had been re-exported and was undertaking jobs abroad. As the duty liability was set aside on merits, the penalties imposed on the main appellant and other appellants were also set aside. Conclusion: The Tribunal set aside the impugned order, allowing the appeals with consequential relief. The vessel LTS 3000 was classified under CTH 8901 or 8906, and the main appellant was found eligible for the benefit of Notification 21/02-Cus at Sr. No. 214. The confiscation of the vessel and the penalties imposed were deemed unwarranted and were set aside.
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