2014 (4) TMI 421 - AT - Customs

Classification of a vessel Pride of Goa (POG) - Whether the vessel POG should be considered as a passenger ship primarily designed for the transport of persons (CTH 8901) or it should be classified as vessel for pleasure or sport under CTH 8903 - Held that - On the issue of classification of the vessel POG, the adjudicating authority has mainly relied upon the fact that the vessel is a Casino vessel and is intended to be made stationary for use as a casino even if it is capable of making voyages in the open sea. On the other hand, importer has come out with the argument that the end use of the vessel should not be made as the basis for classifying a vessel under the Customs Tariff Act - appellants imported transhippers which were vessels used for carrying cargo loaded from the harbour and carry the same for unloading cargo into the large vessels. Temporary use of POG in a stationary position will not change the classification of POG when the same is capable of moving across the seas/oceans but has to be mostly made stationary due to the restrictions imposed by the local laws. It will be a strange situation to classify a vessel under CTH 8901 if used for making trips to open sea, with a night halt arrangement in the sea, but classify the same vessel under CTH 8903 if used in a predominantly stationary position. In view of the above observations, we are of the opinion that Casino vessel POG imported by the importer is principally designed to carry passengers and has been correctly assessed under CTH 8901 - classification of POG and its assessments have been correctly made and it is held that any value addition will not have effect on duty when the vessel of CTH 8901 imported by the appellant stood exempted under an exemption notification - Decided in favour of assessee.

Issues Involved:
1. Classification of the vessel "Pride of Goa" (POG).
2. Valuation of the vessel POG.
3. Demand for customs duty and imposition of penalties.
4. Invocation of the extended period for raising the demand.
5. Allegations of suppression of facts and mis-declaration by the importer.

Detailed Analysis:

1. Classification of the Vessel "Pride of Goa" (POG):
The core issue was whether the vessel POG should be classified under CTH 89011010 as a passenger ship or under CTH 89039990 as a vessel for pleasure or sport. The adjudicating authority classified POG under CTH 89039990, citing its use as a stationary casino vessel. However, the appellants argued that POG, being capable of carrying passengers and making voyages, should be classified under CTH 89011010. The Tribunal referred to the definitions under the Merchant Shipping Act 1958, which classify a passenger ship based on its capability to carry passengers, not on its end use. The Tribunal concluded that POG, designed to carry passengers, should be classified under CTH 89011010, aligning with the Merchant Shipping Act and various certificates issued by competent authorities.

2. Valuation of the Vessel POG:
The appellants contended that the valuation of POG was correctly declared based on the agreement between the importer and the supplier. The Tribunal noted the detailed explanation provided by the appellants regarding the purchase price and payment terms, including the role of M/s Wave Master Ship Supplies Pte. Ltd. as brokers. The Tribunal found no evidence of undervaluation or additional payments not declared to Customs, thereby accepting the declared valuation.

3. Demand for Customs Duty and Imposition of Penalties:
The adjudicating authority had imposed penalties on the importer and its director for mis-declaration and undervaluation. However, the Tribunal, having decided in favor of the importer on the classification and valuation issues, found no grounds for imposing penalties. The Tribunal emphasized that the detailed description provided in the bill of entry and the classification assessed by the Revenue were correct, negating any basis for penalties.

4. Invocation of the Extended Period for Raising the Demand:
The appellants argued that the extended period for raising the demand could not be invoked as there was no suppression of facts or willful mis-statement. The Tribunal agreed, stating that the detailed description of the vessel was provided in the bill of entry, which was assessed and cleared by the proper officer. The Tribunal held that there was no suppression of facts, and the extended period invocation was unjustified, making the demand time-barred.

5. Allegations of Suppression of Facts and Mis-declaration:
The Tribunal found no evidence supporting the allegations of suppression of facts or mis-declaration by the importer. The detailed description in the bill of entry and the subsequent assessment by the Revenue indicated transparency in the import process. The Tribunal emphasized that the onus of correct classification and exemption availment lies with the assessing officers, and the importer had fulfilled its duty by providing accurate descriptions.

Conclusion:
The Tribunal allowed the appeals filed by the appellants, setting aside the classification under CTH 89039990, the demand for customs duty, and the imposition of penalties. The Tribunal confirmed that POG should be classified under CTH 89011010 as a passenger ship, and the declared valuation was correct. The invocation of the extended period for raising the demand was also set aside as time-barred.

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