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TMI Blog2024 (11) TMI 949X X X X Extracts X X X X X X X X Extracts X X X X ..... peals) contention that the freight should be included is not legal and correct. On careful perusal of the order-in- original, we find that there is absolutely no infirmity in the order of the Adjudicating Authority, therefore, the same needs to be upheld. - HON'BLE MEMBER ( JUDICIAL ) , MR. RAMESH NAIR And HON'BLE MEMBER ( TECHNICAL ) , MR. RAJU Shri Vikas Mehta , Consultant for the Appellant Shri Sanjay Kumar Superintendent ( AR ) for the Respondent ORDER RAMESH NAIR The briefed facts of the case are that the appellant purchased one ship (vessel), namely, M.V. Advaita from M/s. Global Grace Shipping Pte. Ltd., Singapore under MOA dated 24.01.2020 (Page 50). The vessel was delivered at Penglai Zhonghai Jinglu Ship Industry Co. It sailed from China to Pipavav on self-propulsion. The vessel was meant for export-import cargo and hence, the same was considered a foreign going vessel. 1.1 On arrival at Pipavav, it was decided to undertake a coastal voyage from Pipavav to Mumbai and back (trial run). Hence, Custom authorities of Pipavav was requested to draw inventory of ship stores. Pursuant to this, a Bill of Entry No. 2339265 dated 13.01.2021 was filed for making payment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the bill of entry after the coastal run has correctly deducted the duty involved in ship stores consumed during the voyage from Pipavav to Mumbai and back, therefore, on this count we do not find any error on the part of assessing authority . Hence the finalisation of assessment is correct and in order. As regard the inclusion of freight, the issue is squarely covered by this Tribunal judgment in the case Sachin kshirsagar 2023 (383) ELT190 (Tri. Mumbai) which is reproduced below:- 11. Before proceeding to resolve the controversy over valuation, and even before examination of the rival submissions on the classification to be adopted, there are several aspects of this dispute that bear elucidation. Vessels and aircraft, not strangely, occupy sufficiently special place in the customs statute to be assigned dual character as is evident from (9) conveyance includes a vessel, and aircraft and a vehicle in Section 2 of Customs Act, 1962, attendant upon which certain obligations devolve on the in-charge therein in Chapter VI of Customs Act, 1962 as do certain privileges, and from (22) goods includes - (a) vessels, aircrafts and vehicles;... which, though devoid of distinct definition th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is, therefore, to be construed as limited to that purpose alone. The universally acknowledged convention on valuation is intended to ensure that commercial engagement between two entities operating from distinct national jurisdictions is not distorted by discriminatory treatment and revenue maximization. Section 14 of Customs Act, 1962 and the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007, framed thereunder, are enacted to assure that uniformity of approach not only reflects international consensus but also is a restriction on the bounds of assessment vested in customs authorities. 14. In the extant valuation regime, the concept of transaction value and the sanctity of declared price as the gold standard converge; in the erstwhile regime, such convergence was merely deemed with transaction value was conceptually articulated in Section 14 of Customs Act, 1962 and the gold standard , to be normally donned by the declared price , ensconced in the Rules prevailing then. This transformation was of such recent origin that the legacy of an entirely different paradigm had yet not been fully burned out of operational memory, and practice, of assessing authorities; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hority of Rule 12, the reiteration of the gold standard in Rule 3 and the empowerment of additions without, in any way, faulting the declaration itself for lacking conformity with Section 14 of Customs Act, 1962. 18. The declared price may be discarded in favour of the actual transaction value , subject to availability of evidence of direct or indirect flow of additional consideration to the seller, for conformity with the concept enshrined in Section 14 of Customs Act, 1962 without recourse to any provision other than Rule 3 of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007. Any other substitution of declared value as transaction value must conform to one of the situations envisaged in Rule 4 to Rule 9, taken sequentially, for validation of assessment for determination of duty of customs after recourse to Rule 12 of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007. It must be borne in mind that the substituted values are approximations permissible solely on the ground that Rule 12 of the said Rules has been properly invoked. The third component, or Rule 10 of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... timations, and any justification offered for the preferment of one over the other is fraught with bias and prejudice, is unarguable. In such circumstances of estimation by the second Chartered Engineer and in not having acceded to the request for cross- examination, the reliance placed upon the report of Shri Rajendra S. Tambe is not tenable as to be sufficiently in conformity with Rule 9 of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007. 20. The justification offered for invoking Rule 12 of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007, i.e., alleged misdeclaration of tariff item in First Schedule to Customs Tariff Act, 1975, does not logically pan out without evidence that such technical distinction, even if uncontested, impacts value of the vessel. The impugned order has not allotted any space for such scrutiny. Recourse to sequential application of Rule 4 to Rule 9 of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 is, thus, without authority of law. The concatenated invoking of Rule 9 and Rule 10 of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 does not appear to have taken ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds before reverting to its former form, it cannot be conjectured that any transportation occurs for invoking the proviso in Rule 10(2) of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007. Consequently, the enhancement of assessable value beyond the declared value fails on every count. 22. The claim of the appellant that the imported vessel merits classification against Tariff Item 8901 90 00 corresponding to other vessels for the transport of both persons and goods is based on the intended use between the base and offshore platforms and the interchangeability of description in the certificate of class issued by several authorities between supply and support vessel. Reliance is placed by Learned Counsel on Rules and Regulations for the Construction and Classification of Steel Ships of Indian Registry of Shipping (IRS) as well as Rules for Building and Classing Marine Vessels of American Bureau of Shipping (ABS). On the other hand, Learned Authorized Representative has placed emphasis on fire-fighting vessel class I in the several certificates to demonstrate that the impugned vessel has been designed for such specialised purpose. On behalf of the appellant, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the classification of the impugned vessel thus 12. As per evidence/documents available on record that the Provisional Certificate of Singapore Registry for the Vessel Dalini Topaz dated 8-1- 2008, the Certificate of Singapore Registry for the vessel Pacific Amethyst , issued on dated 30-4-2009, the Provisional Certificate of Indian Registry dated 30-6-2017 for the vessel Sagar Fortune , the final certificate of Indian registry dated 5-10-2017 issued for the vessel Sagar Fortune , all describe the said vessel as Steel Offshore Supply Vessel . It is also clear from the statements of Shri K.K. Sanjeev, Head of the Department (Classification and Certification) Indian Registry of Shipping, and Capt. Bijoy Kumar Sharma, Senior! Surveyor, Indian Registry of Shipping, that all these above documents give only generic description of the said vessel and that it is the class certificate which provides the exact class notation and description of a vessel. It can therefore be seen that the description Offshore Supply Vessel is merely a general description of the vessel Sagar Fortune and that the exact description and class of the said vessel would be as per the description and class mentione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that is why the importer has imported it. It is to be employed. This vessel is also equipped with 40 cabins onboard. Capt. Shri Bijoy Kumar Sharma, Surveyor of IRS, who has surveyed the said vessel, has deposed in his statement these cabins are meant to provide accommodation to specialized persons (SPS persons) like Technicians, Surveyors, Engineers, Divers, Ship s crew, etc. and that these cabins can also be used for rescuing the staff of Rigs/Platforms in case of an emergency. It therefore is evident that the importer, has imported this vessel so that it can be kept in very close proximity to oil rigs such as of M/s. ONGC to provide support in various forms and if need be it can douse the fire on such rigs and also accommodate its technicians in the cabins available onboard this vessel. It is, therefore, evident from all these features available; on this vessel that these functions and purposes are its main functions and that the navigability of this vessel is subsidiary to these functions because if navigability and supply is to be considered its primary functions then these special and features/functions like firefighting, DPS and large number of cabins, which are otherwise n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refore, it is evident that the importer had deliberately misdeclared the OTH of the subject vessel as 8901 90 00 with an intention to evade duty. Now that the subject vessel is liable to be properly classifiable under CTH 8905 90 90, the basic customs duty @ 5% now is leviable on the subject vessel by virtue of it getting classified under CTH 8905 90 90. Therefore, the total differential duty on the subject vessel on account of its re-classification and re- determination of value amounts to Rs. 3,53,25,921/-, as detailed in para 3.4 above. The said differential duty therefore needs to be demanded and recovered from the Importers M/s. S.S. Offshore Pvt. Ltd. in terms of the provisions of Section 28(4) of the Customs Act, 1962, along with the applicable interest thereon under section 28AA ibid. to counter which no arguments have been offered on behalf of the appellant except to submit that the carrying capacity and its intended use render it classifiable against Tariff Item 8901 90 00 of First Schedule to Customs Tariff Act, 1975. On the other hand, the disposal of the alternative proposition thus 13. I find that the importer in their written submission dated 6-3-2018/7- 3-2018 have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpugned order between Heading 8905 and Heading 8906 of the First Schedule to Customs Tariff Act, 1975. That gap must be bridged to enable which we set aside the impugned order and remand the matter back to the original authority for a fresh decision on the claim of the appellant for fitment within Heading 8906 of First Schedule to Customs Tariff Act, 1975. As this remand is intended to arrive at the appropriate classification, the appellant may also make its submissions for fitment within the original classification, in addition, should they choose to do so. 25. The enhancement of value of the impugned vessel is set aside in accordance with our findings supra. The sole issue that remains is the choice of the appropriate classification. The controversy is contentious and the alternative classification proposed by customs authorities is based upon reliance on technical features to distinguish it from a capability inherent in all vessels that put out to sea in terms of subordination to its principal function. With that complexity to be resolved, there is no scope for indicting the individuals in these proceedings for deliberate misdeclaration. That the benefit of an exemption has been ..... X X X X Extracts X X X X X X X X Extracts X X X X
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