2018 (4) TMI 422 - AT - Customs

Rectification of Mistake - classification of imported vessels - Jurisdiction - Held that - In considering the submissions of the notice on classification, the adjudicating authority has not paid sufficient attention to the harmonious construction of the descriptions in chapter 89 of the First Schedule to the Customs Tariff Act, 1975 - Under the scheme of the tariff, there are certain governing principles the specific prevailing over the general and the later being more valid than the previous are relevant here. It would appear from the findings of the adjudicating authority that the declaration furnished at the time of filing the bill of entry for the ships, when customs duties were nil and, therefore, susceptible to placement without thought of consequence, weighed heavily. Chapter 89 covers all manner of vessels from ships, ocean-going or otherwise, to diverse others. Heading 8905 applies to floating structures intended for specialized use with navigability as a subsidiary feature. This does not imply that navigation is the significant and compelling feature of those vessels that are classifiable under 8901. All the goods enumerated in chapter 89 have some association with the waters and it is only flotsam, jetsam and wrecks that may be deprived entirely of navigability. It would appear that the adjudicating authority has failed to appreciate the sense and implication of the expression navigability which is required to be harmoniously read with the description in that subheading instead of being read as the distinction between that subheading and other subheadings of the chapter. The classification merits fresh determination particularly in the light of the various judicial decisions dealing with import of supply vessels - the mistakes in the order of the Tribunal require rectification. These issues do not find sufficient coverage in the adjudication order. The plea of the applicant for remanding the matter to the original authority till disposal of the dispute on jurisdiction is not to be ignored - In view of the above terms of remand, which would require determination of dutiability itself, recourse to section 111 of Customs Act, 1962 is in jeopardy. it would, therefore, be appropriate to set aside the confiscation in the order-in-original. Application for ROM disposed off.

Summary

Issues Involved:

1. Classification of the ships under the Customs Tariff Act, 1975.
2. Procedural formalities of import on each entry into India.
3. Confiscation of the ships under Section 111 of the Customs Act, 1962.
4. Fresh determination of duty liability under Section 15 of the Customs Act, 1962.
5. Exclusion of duty liability for the period barred by limitation.
6. Entitlement to concessional duty under notification no. 1/2011-CE.
7. Jurisdiction of officers issuing show cause notices.

Detailed Analysis:

1. Classification of the Ships:
The Tribunal initially classified the ships under heading no. 89059090 of the Customs Tariff Act, 1975, against the applicant's claim for classification under heading no. 89019000. The applicant contended that the Tribunal failed to consider critical precedents, including Hal Offshore Ltd v. Commissioner of Customs (Import), Mumbai, and others, which could have led to a different conclusion. The Tribunal recognized the need to re-evaluate the classification, considering the technical specifications and the nature of the ships, which had not been thoroughly addressed in the original adjudication.

2. Procedural Formalities of Import:
The Tribunal held that the ships, being goods and not conveyances, were required to comply with procedural formalities of import on each entry into India. This included filing Bills of Entry, which the applicant had failed to do, leading to a loss of duty revenue. The Tribunal emphasized the necessity of complying with Section 46 of the Customs Act, 1962, which mandates the filing of Bills of Entry for imported goods.

3. Confiscation of the Ships:
The original order upheld the confiscation of the ships under Section 111 of the Customs Act, 1962, with a reduced fine. However, the Tribunal found that the confiscation was premature, given that the primary issue of whether the ships were goods or conveyances had not been resolved. Consequently, the confiscation order was set aside pending a fresh determination of the ships' status.

4. Fresh Determination of Duty Liability:
The Tribunal accepted the applicant's claim for a fresh determination of duty liability under Section 15 of the Customs Act, 1962. This included re-evaluating the duty based on the correct classification and considering the period barred by limitation. The Tribunal directed the adjudicating authority to re-compute the duty liability, taking into account the correct rate of exchange and the appropriate notification for additional duties.

5. Exclusion of Duty Liability for the Period Barred by Limitation:
The Tribunal acknowledged the applicant's plea to exclude the duty liability for the period beyond the statutory limitation. The original adjudication had failed to consider this aspect adequately, leading to a flawed determination of the duty liability. The Tribunal directed a re-assessment, ensuring that the limitation period was duly considered.

6. Entitlement to Concessional Duty:
The applicant argued for entitlement to a concessional duty of 1% under notification no. 1/2011-CE, citing the Supreme Court's decision in SRF Ltd v. Commissioner of Customs. The Tribunal found that this issue had not been adequately addressed in the original order and required rectification to prevent a miscarriage of justice. The adjudicating authority was directed to consider this claim during the re-determination process.

7. Jurisdiction of Officers Issuing Show Cause Notices:
The Tribunal addressed the jurisdictional challenge raised by the applicant, which was based on the decision in Mangali Impex Ltd v. Union of India. The Tribunal noted that the jurisdictional issue was significant and had the potential to cause irreparable harm if not resolved. Given the pending Supreme Court decision on this matter, the Tribunal directed that the adjudicating authority await the final decision before proceeding further.

Conclusion:
The Tribunal allowed the application for rectification of mistakes, modifying its previous order to include a comprehensive re-evaluation of the classification, duty liability, and jurisdictional issues. The case was remanded to the adjudicating authority for fresh determination, ensuring that all relevant legal and procedural aspects were thoroughly considered. The confiscation order was set aside, and the adjudicating authority was instructed to re-assess the matter following the Supreme Court's decision on jurisdiction.