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TMI Blog2013 (3) TMI 407X X X X Extracts X X X X X X X X Extracts X X X X ..... ould be assessed. - Decided in favor of assessee. - Tax Appeal No. 932 of 2006 - - - Dated:- 26-7-2012 - Akil Kureshi and Harsha Devani, JJ. Shri Paresh M. Dave, for the Appellant. Shri A.Y. Kogje, for the Respondent. JUDGMENT The appeal is filed by the assessee which is a shipping company challenging order dated 12-4-2006 [2006 (206) E.L.T. 788 (Tri.)] passed by the Customs, Excise Service Tax Appellate Tribunal ( the Tribunal for short). By such judgment, the Tribunal confirmed the order of the Adjudicating Authority dated 30-6-2004 as upheld by the Appellate Authority by his order dated 28-2-2005. 2. At the time of admission of appeal, following substantial questions of law were framed : (A) Whether 40 M.T. of scrap generated during repairing of barges was imported goods as defined under Section 2(25) of the Customs Act, 1962 in the facts of this case? (B) Whether 40 M.T. of scrap generated during repairing of barges was liable for confiscation under the provisions of the Customs Act, 1962? (C) Whether the order of the Appellate Tribunal upholding confiscation of scrap and imposition of penalty on the appellant is legally correct in the facts and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 50,000/- on the company and also imposed separate penalty of Rs. 25,000/- on the Director of the company. 6. In such order, the Adjudicating Officer noted that such barges were brought into India as containers for imported goods by one M/s. DOSA but later on sold to the assessee on 9-2-1996 and were brought to Jamnagar or Mul Dwarka by the assessee for plying in Indian waters. He noticed that the original owner M/s. DOSA had not filed any bill of entry for such barges. Upon inquiry with the assessee, it was found that for certain irregularities in import of such vessels, the assessee was facing litigation. The Commissioner of Customs, Mumbai had passed order confiscating the vessel but also offered redemption fine in lieu of confiscation. It is not in dispute that against such order, assessee has filed appeal before Tribunal and thereafter, before Mumbai High Court and such appeal was pending. 7. The Adjudicating Officer however, was not influenced by such background history. He was of the opinion that such scrap was generated during repair work which amounted to breaking of ship. He observed that just because the barges after repairs were again put to use would not mean that s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e said barges at the time of clearance from the Customs Area. The said notification also doe not give any free import of any floating structure for repairing and one cannot presume the activity of breaking is going on for the purpose of repairing and not for totally broken up. Just because of the fact that barges after repairing were again put into use by plying into the Indian Water, import of waste and scrap generated during the course of repairing of barges cannot be allowed without following the procedure laid down under the Customs Act, 1962. For the very reason that out of four barges, three barges which were put into use i.e. plying were not seized and proposed for confiscation but only scrap generated during the course of repairing removed from the Customs Area without following the procedure prescribed under the Customs Act, 1962 for importation were placed under seizure for illegal import. I also find that only 40 Mts of waste and scrap were placed under seizure, which was removed from the Customs Area, and lying in the Godwon of M/s. Padhiar Hi-Tech Pvt. Ltd, Sikka and 10 Mts lying on jetty area of Rozy Pier Port were not placed under the seizure. Therefore, argument p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Act, 1962 . In the instant case M/s. Bedi Shipping Ltd. had contravened the provisions of the said notification and cleared the four barges for breaking therefore the same are liable for confiscation under Section 111(o) of the Customs Act, 1962 but since the barges are not placed under the seizure, it cannot be confiscated under the said provisions. On the basis of above observations, he passed the following operative order : (1) I order confiscation of seized goos viz. 40 Mts. Iron Scarp valued at Rs. 3,60,000/- under Section 111(a), (h) (f) of the Customs Act, 1962. However, I give an option to redeem the goods on payment of fine for Rs. 90,000/- (Rs. Ninety Thousand Only) in lieu of confiscation plus duty as provided under Section 125 of the Customs Act, 1962. This option may be exercised within 30 days from the date of receipt of this order. (2) I impose penalty of Rs. 50,000/- (Rs. Fifty Thousand only) upon M/s. Bedi Shipping Ltd. under section 112(a)(ii) of the Customs Act, 1962. (3) I impose penalty of Rs. 25,000/- (Rs. Twenty Five Thousand) upon Shri Arvind K. Shah, Director of M/s. Bedi Shipping Ltd. under section 112(b)(ii) of the Customs Act, 1962. The due ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such repair work is done, number of parts need to be replaced generating scrap. These parts are replaced by indigenously manufactured parts such as plates, nuts, bolts and other items. In the present case, the assessee had pointed out that the value of parts replaced exceeded the value of scrap. When the barges are eventually condemned and then broken, the value of the barges including the replaced parts would be taken into account for reckoning the value for determining the customs duty. He clarified that the dispute about the procedure for import of the barge has arisen in case of only one vessel and there is no dispute about the rest of them. 11. On the other hand, Shri Kogje for the department opposed the appeal contending that the Tribunal has given a correct verdict. The status of import of barges by the assessee itself is in doubt. Appeal before Mumbai High Court is still pending. He however, submitted that during the repair, whatsoever scrap is generated, would be exigible to customs duty. 12. Having thus heard learned counsel for the parties and having perused the documents on record, we find that one of the barges purchased by the appellant did run into some legal co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were brought for repair work and entrusted to a contractor. The assessee s contention that during such repair works, the value of parts replaced, exceeded the value of scrap generated is not disputed by the department. Under the circumstances, we are of the opinion that the Adjudicating Officer as well as the Appellate Commissioner committed an error in holding that during the repair work of the barges what activity was carried out amounted to breaking and that therefore, exemption which was granted for such barges on payment of customs duty, stood withdrawn. 15. Under the circumstances, we are of the opinion that scrap generated during the repair work was not exigible to customs duty when brought in India. We are confining our observations on the basis of the facts of the case where it is stated that approximate weight of each barge was 100 metric tones and it was during repair work of four such barges that total scrap of 40 metric tones was generated. We are also influenced by the fact that during such repair work substantial amount of indigenously manufactured parts were fitted in the barges and the value of such replaced parts would also be part of the value of the barges as ..... 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