2017 (10) TMI 984 - AT - Customs

Clearance of finished goods without filing bills of entry - case of Revenue is that Customs was in dark. It had no scope to know whether the boat cleared was war ship falling under CTH 8906 manufactured by appellant - Held that - There is no dispute that the raw materials were sent to the ware house of the appellant under in-bond bill of entry for use in manufacture. Dispute on classification was raised by Revenue contending that the boat manufactured by appellant was of the nature dealt by CTH 8903. We do not understand why Maharashtra Police shall be investing huge public money for purchase of boat for pleasure without being used for the purpose of patrolling. There was breach of law for not informing the excise authorities as to the manufacture carried out in ware-house and also there was breach of law made by appellant without filing ex-bond of bill of entry. Maharashtra Police having clarified that the boats were meant for the purpose of security and patrolling, no penalty is imposable on the appellant in the fitness of the circumstances of the case since warship was exempt from duty. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Classification of imported goods under CTH 89.06 vs. CTH 8903, Requirement of ex-bond bill of entry for imported raw materials, Breach of law by not informing excise authorities about manufacturing activity, Applicability of duty exemption for warships.

Classification Issue:
The appellant imported raw materials to manufacture patrolling boats for Maharashtra Police, claiming exemption under Notification No.36/2001-CE for warships falling under CTH 89.06. Revenue argued that the boats were high-speed motor boats for pleasure, falling under CTH 8903. The Tribunal examined the characteristics of warships and the purpose of the boats, ultimately siding with the appellant due to the boats' use for security and patrolling, as confirmed by Maharashtra Police.

Ex-bond Bill of Entry Issue:
Revenue contended that the appellant did not file an ex-bond bill of entry for the imported raw materials, leading to a lack of clarity regarding the nature of the manufactured boats. The Tribunal acknowledged the breach but considered the boats' intended use for security purposes by Maharashtra Police as a mitigating factor, resulting in no penalty imposition on the appellant.

Breach of Law Issue:
The appellant failed to inform excise authorities about the manufacturing activity in the warehouse and did not file the required ex-bond bill of entry. Despite these breaches, the Tribunal recognized the boats' purpose for coastal security and patrolling, as confirmed by Maharashtra Police, leading to a decision not to impose penalties on the appellant.

Duty Exemption Issue:
The Tribunal concluded that the manufactured boats, intended for security and patrolling purposes, were exempt from duty as warships under CTH 89.06, contrary to Revenue's classification under CTH 8903 for pleasure or sports vessels. The clarification provided by Maharashtra Police regarding the boats' use further supported the Tribunal's decision to allow the appeals in favor of the appellant.