2014 (12) TMI 321 - AT - Central Excise

Classification under CETH No. 89039200 or under CETH No. 89011030 - Whether the vessel manufactured by the appellants has to be treated as yacht or it has to be treated as a passenger vessel - Exemption under Notification No. 8/2003/CE dated 01.03.2003 - Held that - First of all there is no evidence to show that the purchaser is engaged in routine operations of passenger transportation. Learned counsel submitted that the vessel is being used in the backwaters in Kerala. We have to take note of the fact that backwater trips in Kerala are basically for pleasure and not for mere transportation. It is difficult to assume that a person would go by backwater spending lot of money when cheaper transportation facilities are available - As per HSN explanation under the Heading, this Heading covers all vessels for pleasure or sports and all rowing boats and canoes, which means that all vessels which are used for pleasure or sports are to be classified under Heading 8903 and similarly all rowing boats and canoes are to be classified under Heading 8903. The use of word all before vessels in the all vessels for pleasure or sports means that all vessels which are used for pleasure or sports are to be classified under Heading 8903 even if these vessels are used for transport of persons or goods in view of their exclusion from 8901 as per HSN explanation under Heading 8901. prima facie appellants may not have a case. Nevertheless having regard to the fact that agreement speaks of passenger vessel, other authorities have treated the vessel as passenger vessel and therefore much more details are required to be considered - Partial stay granted.

Summary

Issues Involved:
1. Classification of vessel as a yacht or passenger vessel under Central Excise Tariff.
2. Eligibility for exemption from duty under Notification No. 8/2003/CE dated 01.03.2003.
3. Confirmation of duty demand, interest, and penalty under Section 11AC of Central Excise Act 1944.

Issue 1: Classification of Vessel:
The appellant, a private limited company manufacturing vessels and boats, faced an investigation for allegedly misclassifying a luxury vessel under CETH No. 89011030 instead of 89039200, resulting in duty evasion. The dispute centered on whether the vessel should be considered a yacht or a passenger vessel. The Commissioner noted the vessel's luxurious features like air-conditioned rooms, lounge/bar area, attached toilets, and swimming platform, indicating it was a pleasure craft rather than a mere transportation vessel. The appellant argued that vessels carrying more than 12 passengers are passenger vessels as per Indian Registrar of Shipping Rules and the Harbour Master's license described it as a passenger boat. However, the Commissioner dismissed these arguments as irrelevant. The Tribunal, considering the purpose of backwater trips in Kerala for pleasure rather than transportation, agreed with the Commissioner's classification. Additionally, the Tribunal cited the HSN Explanatory Notes to support the classification under Heading 8903 for vessels used for pleasure or sports, even if transporting persons or goods, thus indicating the appellant may not have a strong case. To proceed with the appeal, the Tribunal directed the appellant to deposit a specific amount.

Issue 2: Exemption Eligibility:
The appellant had cleared goods valued at &8377; 2,88,74,821/- without duty payment, claiming exemption under Notification No. 8/2003/CE due to the aggregate value of dutiable goods being below &8377; 150 lakhs. However, proceedings resulted in a duty demand exceeding &8377; 11 lakhs, along with interest and penalty under Section 11AC of the Central Excise Act 1944. This indicated a discrepancy in the appellant's eligibility for the exemption, leading to the duty demand confirmation.

Issue 3: Confirmation of Duty Demand:
The proceedings initiated against the appellant culminated in the confirmation of duty demand exceeding &8377; 11 lakhs, along with interest and penalty under Section 11AC of the Central Excise Act 1944. This decision was based on the investigation's findings regarding the misclassification of the luxury vessel and the duty evasion associated with it. The confirmation of duty demand highlighted the seriousness of the alleged offense and the subsequent penalties imposed under the relevant legal provisions.

In conclusion, the judgment primarily revolved around the classification of the vessel as a yacht or a passenger vessel, the appellant's eligibility for duty exemption, and the confirmation of duty demand with associated interest and penalties. The detailed analysis delved into the specific arguments presented by both parties, the Commissioner's observations, relevant legal provisions, and the Tribunal's decision to proceed with the appeal subject to a specific deposit.