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TMI Blog2016 (7) TMI 645X X X X Extracts X X X X X X X X Extracts X X X X ..... incorrect. - We are fortified in this view by the HSN explanatory notes to chapter 8905, which states that the vessels covered under this heading normally function or perform other main function in a stationary position. In the case in hand, it is admitted fact that the vessel is continuously moving while laying the pipes and undertaking any operation in relation to the petroleum exploration. In our considered view, the classification of the vessel LTS 3000 would be correct under 8901 or 8906 but not definitely under 8905 as has been held by the Adjudicating Authority. If the classification of the vessel falls under chapter heading 8901 or 8906, the duty liability is 'nil' is undisputed. - Demand set aside - Decided in favor of assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... No.29 requires that the goods are imported by the Oil and Natural Gas Corporation or Oil India Ltd. (hereinafter referred to as the licensee) or a sub-contractor of the licensee. 6. The investigations carried out revealed that : (i) The vessel LTS 3000 was imported permanently on full payment to the supplier and it was registered at Indian Register of Shipping on 18.11.2010; (ii) The importer had submitted two different invoices one before Customs and other before DGH. Both these documents were filed by M/s. GAC Shipping (India) PVT Ltd. CHA on behalf of the importer. The Invoice submitted to Customs and DGH though had same number and date, the contents like name of the consignee, CIF value and additional information related to offshore activities were found to be different. Both these invoices were signed by Shri Ashiwini Kumar, CEO of M/s. OIF as well as of M/s. L&TSSPL. (iii) The Bill of Entry was filed on 02.12.2010 and the application for Essentiality Certificate was filed on 03.12.2010. The Essentiality Certificate having importers name as M/s. L&T Sapura Shipping Pvt. Ltd. was issued on 06.2.2010. This essentiality Certificate was issued subject to Notification No.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rds of the case submits that the issue is regarding denial of benefit of Notification 21/02-Cus on the vessel imported by the main appellant as also the classification of the said vessel. 9.1. It is his submission that ONGC was a licensee of government of India for exploration of oil and gas in the Mumbai High and had by contract dated 16.10.2009 awarded the said contract to Larsen & Toubro Ltd. for MHN Process Platform & Living Quarters project. The project also had a clause for getting the work done through the sub-contractors as is evident from clause no.5.2.2. It is his submission that in pursuance of this clause the main appellant was appointed by Larsen & Toubro Ltd. to undertake the various works in relation to the contract. It is his submission that the benefit of Notification 21/02-Cus at sr. No. 214 is applicable to the main appellants vessel as the said work undertaken by the main appellant is in respect of exploration/petroleum operation of ONGC. He would then take us through the exemption notification. It is his submission that the terms contractor and sub-contractor as indicated in the Notification have not been defined anywhere in the Act as well as in the no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Certificate application for importation of vessel without payment of duty. He would submit that the licensee ONGC always understood the Appellant as a bona fide sub-contractor and the Essentiality Certificate was issued by DGH on the basis. It is his submission that this Essentiality Certificate was produced at the time of clearance of the vessel. He would submit that the revenue authorities after initiation of the investigation directed the DGH to cancel the Essentiality Certificate given to L&T. The said Essentiality Certificate was cancelled by DGH which was challenged by the appellant in writ petition before the High Court of Bombay and their Lordships stuck down the cancellation of the certificate and restored the Essentiality Certificate, which would mean that the vessel which has been imported by the main appellant is used for petroleum operation of ONGC. He would then draw our attention to affidavit filed by the officers of ONGC before High Court on this point and submits that before the higher court it is admitted that the main appellant is a bonafide sub-contractor of L&T in terms of condition no. 29 of Notification 21/02-Cus dated 01.03.2002. 9.3. It is his submission t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y to conduct multiple functions to which navigation along with pipe laying being primary functions. The vessel is also designed to carry cargo for the purpose of laying pipes and further lay pipes on the sea bed. He would submit that the classification under 8905 as proposed by the revenue in the impugned order is totally incorrect as vessel LTS 3000 navigation is not subsidiary to the main function as is the requirement of the Tariff 8905. It is his further submission that to get classified under Tariff 8905, the vessel has to be stationary while performing the main function, in the case in hand vessel is required to navigate its way to lay pipes on the ocean bed. It means that navigation is its primary function. Subsequently he would take us through HSN explanatory notes to submit that the classification as proposed by the revenue is incorrect. It is his further submission that the vessel LTS 3000 has a crane and is equipped with pipe laying equipment and is a self-propelled ship, registered under the Merchant Shipping Act, as an ocean going vessel. He would submit that the Indian Register of Shipping class have certified the ship LTS 3000 with SUL and IY, DP(1) class notatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is totally unwarranted as all the actions of the appellant are in compliance with what was required as a employee of ONGC for implementation of the agreement between ONGC and L&T. As regards the affidavit, it is his submission that it has been filed and submitted to DGH, clearly states that L&T is sub-contractor of L&T and never contended that main appellant is a sub-contractor of ONGC. The affidavit did not misguide the DGH. He relies upon the decision of the Tribunal in Schlumberger Asia Services P. Ltd. for the proposition that name of sub-contractor need not be mentioned in the agreement between L&T and ONGC; relies on the judgment of Tribunal in J.M.Baxi & Co.(supra). For the proposition that no penalty can be imposed on the person who has not dealt with the goods and merely discharged his duty obligation; ONGC - 1995 (79) ELT 117 for the proposition that no penalty can be imposed on PSU or its employees. He would rely on the Essentiality Certificate issued by the DGH dated 29.10.2012 wherein the name of the sub-contractor and contractor are clearly mentioned and main appellants name is mentioned as importer, and submits that the list clearly indicates that the vessel is im ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant is in violation of the condition 29 stipulated in Notification No.21/2002 and main appellants are not entitled to benefit of exemption. For this purpose he placed reliance on the judgments of the apex court in Gammon India Ltd vs. CC , Mumbai 2011(2690 ELT 289(SC). It is settled law that an exemption is an exemption and should be construed strictly. For this purpose, he placed reliance on the following judgement:- (a) Jairaj Ispat Vs. CCE, Hyderabad-2001(127)E.L.T. 722 (b) Novapan India Ltd vs. CCE Hyderabad 1994 (73) 769(SC) (c) Golden Dew Tea Factory Vs. commissioner of C.Ex. Coimbatore-2007(219) ELT 362. 11.3. It is his submission that reliance placed by the ld. Counsel on the judgment of Bombay High Court is incorrect as High Court had specifically stated the views expressed by the judgement are prima facie views and it left the issue of deciding the main appellant is a sub-contractor or otherwise to the authorities. 11.4. As regards classification of the vessel, it is his submission that has a special crane having capacity to lift 3000 Mt and is fitted with pipe laying equipments, and it is appropriately classifiable under heading 8905 and not definitely classi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exploration licences are exempt from payment of duty if they fulfil the condition as mentioned at Condition no. 29. It is undisputed that ONGC are licensee for petroleum operations undertaken under petroleum exploration licences or mining lease post 01.04.1999 granted by the Government of India. The condition as reproduced above, of the notification, clearly indicates that the goods can be imported by ONGC or a sub-contractor which are used in connection with the petroleum operations to be undertaken. In the case in hand it is undisputed that vessel LTS 3000 is used in the petroleum operations as can be ascertained from the Essentiality Certificate issued by the DGH. Clause (c) of condition no. 29 is being disputed by the revenue that the appellant herein is not a sub-contractor. On plain reading of the affidavit filed by the respondent officer i.e. Shri Rajeev Kumar, DGM (E) of ONGC before the Hon'ble High Court in writ petition no. 2980 of 2011 on oath states that - "It was pointed out that in the request for issue of essentiality certificate, correct facts had been disclosed i.e. the vessel LTS 3000 is being imported on re-export basis for the purposes of carrying out obl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mining Lease issued or renewed after the 1st of April, 99 and granted by Govt. of India/State Govt. and have been imported for execution of contract as per subject and reference matter mentioned above. This has reference to said Notification No. 21/2002 Customs dated 01-03-2002 amended vide Notification No. 26/2003-Customs dated 1-3-2003 as per S. No. 214 of the Table, List 12, Condition 29 issued by Ministry of Finance (Department of Revenue), New Delhi. This certificate is valid for a period of six months from the date of issue." 13.4. A plain reading of the Essentiality Certificate as reproduced hereinabove would indicate that the vessel LTS 3000 is required for the petroleum operations undertaken by the ONGC. This Essentiality Certificate is affirmed as correct Essentiality Certificate by the High Court of Bombay in the case of L&T Ltd. in a writ petition in favour of petitioner, (reported at 2013 (298) ELT 217 (Bom). The issue of Essentiality Certificate now stands decided in favour of the main appellant as there is no dispute that the Essentiality Certificate as required under notification is on records accepted as correct certificate. 13.5. The second requirement of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd., Mumbai on turnkey basis. M/s. Larsen & Toubro Ltd. has engaged L&T Sapura Shipping P. Ltd. for execution of said job. We hereby declare that items vide B/L No................. dated................ and invoice no. IN/LTS3000/005 dtd. 12.11.2010. 185753 dtd. 12.11.2010, 80515386 dtd. 12.11.2010, 80515948 dtd. 12.11.2010, IV071542 dtd. 12.11.2010 are being imported by L&T Sapura Shipping P. Ltd. and the goods will be used for Mumbai High North Filed, MHN Process Platform & Living Quarters project (MNP & LQ) project, west coast of India as per the terms and conditions of the contract MR/OW/MM/MNP-MLQ/16/2008 dated 16.10.2009. Oil and Natural Gas Corporation Ltd. (ONGC) will pay any duties, fines that may become payable in the event L&T Sapura Shipping P. Ltd. does not comply with the terms of Notification 21/02-Cus dated 01.3.2002 as amended by Notification 26/03-Cus dt.01.03.2003 Sl.No. 214 of the table of import." The said undertaking categorically states that the main appellant is a sub-contractor. It is also on record that none of the conditions of the said notification are contravened or violated by the main appellant. Assuming that there is nothing on record to indica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d goods have been imported under a contract signed under the New Exploration Licensing Policy, and containing the name of such sub-contractor. 2.4.2 The condition (c)(i) in all the Sl. Nos. of the said notification requires that the importer should produce an EC, which should indicate that the goods have been imported under a contract entered between the Government and the contractor; and it should also contain the name of the sub-contractor. The requirement of containing the name of the subcontractor is in the EC issued by the DG Hydrocarbons and not in the original contract entered into by the contractor with the GOI. If the sub-contractor is required to enter into a contract with the GOI, then the condition viz an affidavit to the effect that such subcontractor is a bona-fide sub-contractor of the contractor would be superfluous. Moreover, at the time of entering into contract, the contractor normally does not know the name of his subcontractor. Hence, it is not possible to include his name in the original contract. 2.4.3 It is, therefore, clarified that non-mention of the name of sub-contractor in the agreement signed between the contractor and GOI cannot be a ground fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essel LTS 3000 is self navigating ocean going vessel. This fact is clearly ascertainable from the certificate of class as given by the Indian Register of Shipping which we reproduce: It is also to be noted that the Indian Register of Shipping has also regarded or registered for the purpose of safety consideration that the vessel LTS 3000 is cargo ship other than any of the above. It is noted that the certificate of class recorded by the Indian Register of Shipping specifically indicates the vessel is sea going vessel. It is common sense that sea going vessel means a vessel for which navigation is primary function and other activities are secondary. It is also on record and admitted that the vessel LTS 3000 is used for laying the underwater pipes on the ocean sea bed which requires navigation from point to point. The self propelled nature of vessel LTS 3000 is not at all disputed by any of the lower authorities. 15. In our view the classification of the vessel LTS 3000 under 8905 by the revenue authorities is totally incorrect. We are fortified in our view by the judgment of this Tribunal in HAL Offshore Ltd. (supra) and J.M.Baxi & Co. (supra). We reproduce the relevant paras fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom the HSN. 4.3 From the various certificates given by the authorities (both in India and abroad) including Indian Registry of Shipping and the professional surveyors who have undertaken the examination and classification of the vessel, the vessel in question is a seismic research vessel. Seismic research is scientific research and therefore, the vessel is a scientific research vessel. There is no evidence produced by the Revenue to the contrary by way of any expert opinion and therefore, the contention of the Revenue that the vessel merits classification under CTH 8905 does not have any sound basis and accordingly, we reject this contention. An argument has been advanced by the Revenue to the effect that a survey vessel cannot be equated with a research vessel. We do not find any rational basis for this argument. The purpose of any scientific survey is to gather reliable data and from the analysis of the data, scientifically valid conclusions can be drawn. Thus collection of data is an integral part of any empirical scientific research and cannot be treated as a separate or distinct activity." The relevant paras from HAL Offshore Ltd.:- "7.9 Now let us see whether there is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ., this Tribunal held that the vessel was classifiable under CTH 8901, on the ground that the vessel was not always in stationary position while carrying out transshipment of cargo and some modes of transshipment involved navigation. In the case before us, the vessels are self-propelled, have capacity for carrying cargo and persons and have unrestricted navigational capability. The certificates issued by the Indian Registry of Shipping and Mercantile Marine Dept. also classify the vessel as supply vessel. Therefore, the ratio of the above decision applies squarely and the impugned vessels merit classification under CTH 8901." The above reproduced paragraphs from the judgment clearly indicate that the navigability is the prime function for classification of a vessel in a specific heading. The question of classifying the vessel in this case under 8905 does not arise. We are fortified in this view by the HSN explanatory notes to chapter 8905, which states that the vessels covered under this heading normally function or perform other main function in a stationary position. In the case in hand, it is admitted fact that the vessel is continuously moving while laying the pipes and undert ..... X X X X Extracts X X X X X X X X Extracts X X X X
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