[Order per : Ramesh Nair, Member (J)]. - These appeals are directed against the Order-in-Original No. 88/2014/CAC/CC(I)/AB/Gr.VB, dated 25-7-2014 passed by the Commissioner, Customs (Import), New Custom House, Ballard Estate, Mumbai.
2. The brief facts of the case are as under :
The Appellant purchased a Japan origin vessel “M.V. Navis Success” (now known as “Happy Success”) from M/s. Trustworth Shipping Pte. Ltd., Singapore under an agreement dated 14-6-2006. The vessel was imported into India by following the conversion procedure at Mumbai Customs House vide F. No. S/6-125/2006Exp. and F. No. S/11-126/P 2006, dated 10-11-2006. The shipping agent M/s. Preetika Shipping Agency Pvt. Ltd. had filed IGM No. 20166/06, dated 6-2-2006. During the course of conversion a Manual Bill of Entry No. 28/2006 was filed with the Export Commissionerate of Mumbai Customs for clearance of fuel/bunkers and provisions on board vessel and paid the customs duty of Rs. 3,06,593/-. The vessel ‘Happy Success’ IMP No. 7375753 was not declared as goods in the IGM No. 20166/06, dated 6-2-2006 filed at Mumbai and no bill of entry was filed for import of the said vessel. The appellant got registered the vessel under Merchant Shipping Act, 1958 with the Registrar of Indian Ships, Mumbai under registration certificate dated 8-9-2006 as an ”Offshore Supply Vessel”. On gathering of intelligence in 2011 by SIIB (Import), New Custom House Mumbai, it was found that no bill of entry was filed for import of the vessel. On further investigation, information regarding the subject vessel “Happy Success” was obtained from the Internet website wherein it was noticed that the category of the vessel was stated to be a ‘Tug’ whereas documents submitted by the importer of the vessel mentioned the category of subject vessel as “Offshore Supply Vessel”, hence the Asst. Commissioner of Customs Special Investigation and Intelligence Branch (Import) ordered to conduct physical survey of the vessel to ascertain the proper category/type of the subject vessel. In this regard the Commissioner of Customs (Import) appointed a Chartered Engineer M/s. Sai Siddhi Associates under a letter dated 23-12-2011. The Chartered Engineer surveyed the vessel and submitted their inspection/survey report vide letter bearing reference No. SSA/CEC/VALUE/HAPPY SUCCESS/1021/2011-12, dated 26-12-2011 wherein he stated as under :-
• The vessel was built in 1974 fitted with one number SMATCO-Winch-Double Drum and in past it was rated to have pulling capacity 30 tonnes. The drums were found jam, rusty, the metal was eaten away and appears to be not being used with lack of preventive as well as routine maintenance, application of lubricants, oiling greasing etc.
• Wire rope of winch was also rusted corrosion due to lack of application of grease, lubricant.
• Power pack/engine of winch was found in rusty condition, no oil spillage near engine or drum space.
• Hydraulic and pneumatic which was necessary for operation and power control was not found on the deck as well as in the engine room.
• Tugger winch, which does dragging of toeing wire/mooring wire were not found on main deck;
• Supporting toeing gears, toeing pins etc. were not found on deck, shark jaws which hold to toeing wire or anchor wire were not found on deck, fuel oil tank of which was found empty condition.
• All joint cables were not found for the said winch, winch was found in painted condition just to protect it from corrosion but paint was found in removed condition, mostly at internals.
Considering the above facts, the Chartered Engineer given opinion that said winch might not have been put in operation or used for more than reasonable period of time, may be more than six to seven years. The said winch is beyond the repair condition might have lost its residual life also. In view of above investigation the vessel ‘Happy Success’ was seized under panchanama dated 28-12-2011 under Section 110 of the Customs Act, 1962 on reasonable belief that the same was imported in contravention of Customs Act, since the importer did not file bill of entry for import of said vessel as required under Section 46 of the Customs Act, 1962. The appellant vide their letter 28-12-2011 made a request for provisional release of the subject seized vessel Happy Success IMO No. 7375753 under Section 110A of the Customs Act, 1962 and undertaken to comply with the condition laid down for provisional release of the subject vessel. During the course of further investigation, statements of Shri Prakash Rajaram Hede, Managing Director of appellant company and statements of Shri Deepak M. Khabrani, Director of M/s. Preetika Shipping Agency Pvt. Ltd. were recorded. On asking the question about non-declaration and filing of bill of entry in respect of the subject vessel Shri Prakash Rajaram Hede stated that they have purchased ocean going utility-cum-offshore supply vessel which as per their bona fide belief does not attract customs duty therefore bill of entry in respect of vessel was not filed. He produced various statutory certificates wherein the vessel was shown registered as a ‘supply vessel’ and not as a ‘Tug’. The vessel, on the request of the appellant was released on provisional basis on filing of manual Bill of Entry No. 04, dated 9-1-2012 declaring the vessel ‘Happy Success’ as ‘supply vessel’ and classified the same under CTH 8901, the said bill of entry was assessed provisionally by the appraising group on execution of bond along with bank guarantee. The appellant paid customs duty as a condition of provisional release. From further investigation, it was revealed from the print out of the website pertaining to ship and shipping company data base on 1-12-2011 that vessel ‘Happy Success’ IMO No. 7375753 was a ‘Tug’. A statement of Shri Sanket Eknath Nare, One Inspector of Chartered Engineer, M/s. Sai Siddhi Associates Mumbai was recorded under Section 108 on 2-3-2013 wherein Shri Sanket Nare stated that the vessel ‘Happy Success’ is built as a ‘Tug’. In view of above investigation a show cause notice No. SG/INV-60/WB/2011/SIIB(Import)/SG/Misc-92/WB/2011SIIB (Import), dated 21-10-2013 was issued wherein the vessel ‘Happy Success’ was proposed to be classified under CTH 8904 as tug and also proposed the confiscation, demand of customs duty, interest and penalties on the allegation of misdeclaration of classification of vessel. A penalty under Section 112(a) and/or 112(b) and/or Section 4(a) of the Customs Act, 1962 was proposed on Shri Prakash Rajaram Hede, Managing Director of appellant company and also on Shipping Company M/s. Preetika Shipping Agency Pvt. Ltd. In the adjudication the vessel ‘Happy Success’ was held to be classifiable as a Tug under CTH 8904 and consequently all the charges proposed in the show cause notice were confirmed by adjudicating order. Aggrieved by the order-in-original parties as well as Revenue filed these appeals.
3. Shri A.K. Prabhakar, ld. Counsel for the appellant made various submissions as under :
(a) The appellant has imported vessel ‘Happy Success’ which is classifiable under CTH 8901 and attracts NIL rate of duty therefore bill of entry was not filed at the time of import. The ld. Commissioner though considered website print out, Chartered Engineer’s report and Memorandum of Agreement for arriving at the classification of the vessel as Tug under CTH 8904 but in the finding he has given up evidence of website information, therefore the entire basis of deciding the classification is Chartered Engineer’s report and MOU. The Chartered Engineer, M/s. Sai Siddhi Associates in their certificate dated 26-12-2011 nowhere mentioned that the subject vessel is a Tug. Moreover, it was specifically mentioned that the vessel had never performed/engaged for toeing/anchor handling. As per the log book, the vessel was used as supply vessel only. The Chartered Engineer has endorsed the fact that in all the statutory certificates, vessel has been classified as ‘Supply Vessel’ and no question was raised on this fact. As regard the subsequent statement of one inspector Mr. Sanket of the Chartered Engineer, who stated that the vessel is built as a tug is of no support to the Revenue for the reason that a detailed certificate dated 26-2-2011 does not confirm that the subject vessel is a tug vessel. Moreover the detailed certificate gives the condition of various parts and on the basis of which it clearly constitutes that the vessel is neither a tug vessel nor it is capable being used for toeing or anchoring. From the various statutory certificates/documents it is clear that the subject vessel is supply vessel and not a tug. Some of the certificate were issued by the Government authorities after conducting the survey and thereafter it was certified the vessel as ‘Supply Vessel’. Therefore the reliance of the ld. Commissioner only on internet print out and statement of one inspector, Shri Sanket which is contrary to the certificate issued by the Chartered Engineer cannot be the basis for deciding the classification. The ld. Commissioner also taken support from the memorandum of agreement between seller of the vessel and the appellant wherein vessel was shown as a Tug. He submits that it was mentioned inadvertently therefore the same cannot be taken as conclusive evidence. In view of the above position it is clear that subject vessel “Happy Success” is ‘offshore supply vessel’ and not a Tug and accordingly merits classification under CTH 8901 and not under 8904 as held by the ld. Commissioner. In support of his submission ld. Counsel placed reliance on following judgments :
(a) CGU Logistic Ltd. v. Commissioner of Customs, Mumbai [ (Tri.-Mum.)]
(b) Hull Offshore Ltd. v. Commissioner of Customs (Import), Mumbai [ (Tri.-Mumbai)]
(c) Prince Marine Transport Services Pvt. Ltd., Hasim Abdul Razka v. Commissioner of Customs (Import), Mumbai [2014-TIOL-2438-CESTAT-MUM = (Tribunal)]
(d) M/s. Raj Shipping Agencies Ltd. v. Commissioner of Customs (Import), Mumbai [2015-TIOL-1405-CESTAT-MUMBAI = (Tribunal)].
(b) As regard non-filing of Bill of Entry at the time of import in the year 2006, he submits that since the appellant had bona fide belief that the subject vessel is classifiable under CTH 8901 which attracts NIL rate of duty the bill of entry was not filed. The bona fide of the appellant also proved that their shipping agency M/s. Preetika Shipping Agency Pvt. Ltd. on 6-11-2006 vide their letter informed the Asstt. Commissioner of Customs, New Custom House regarding conversion from foreign to coastal run of vessel, ‘Happy Success’ and filed the IGM. This letter given complete detail regarding the conversion. If at all the customs department was of the view that Bill of Entry should have been filed, on the basis of this letter the department could have asked the appellant for filing of Bill of Entry. He submits that there was confusion in the customs department itself that in case of coastal run vessel whether Bill of Entry is to be filed or otherwise, accordingly the matter was referred to the Board and only by the Board Letter F. No. 450/79/2010-CUS-IV, dated 25-9-2010 it was made clear that Bill of Entry in respect of vessel is required to be filed. However, before 25-9-2010 there was no clarity therefore bona fide belief of the appellant cannot be doubted. In view of this undisputed position the appellant has not violated any provision of law in non-filing of bill of entry in respect of the vessel at the time of import in the year 2006.
(c) He further submits that the show cause notice was issued demanding duty under Section 28 whereas the same was confirmed in the impugned order partly under Section 28 and partly under Section 125 which is absolutely illegal as the adjudication order cannot travel beyond the scope of show cause notice. Since the show cause notice was issued under Section 28 it could have been issued maximum within one year from the date of import i.e. 6-11-2006 whereas the show cause notice was issued on 21-10-2013 i.e. after almost six years eleven months. It is his submission that under any circumstances the show cause notice could not have been issued beyond 5 years therefore show cause notice itself is time bar. He submits that as soon as the vessel was converted from foreign to Indian coastal run vessel on arrival at port the IGM and bill of entry was filed in respect of the said vessel. In the Shipping Agency’s letter dated 6-11-2006 it is very clear that the IGM and bill of entry was filed for the first time after conversion therefore if at all the customs department is of the view that bill of entry is required to be filed, nothing prevented the Department from the said action. In view of this, there is complete disclosure of the fact regarding the import of said vessel, ‘Happy Success’ to the customs department. Therefore there is no suppression of facts on the part of the appellant, for this reason also the show cause notice issued much after five years is time bar. In this support he placed reliance on the judgment of Montana Valves & Compression Pvt. Ltd. v. Commissioner of Customs, Mumbai [ (Tribunal)].
4. On the other hand, Shri M.K. Sarangi, ld. Joint Commissioner (AR) appearing on behalf of the Revenue reiterates the findings of the impugned order. He submits that the vessel was declared as offshore supply vessel in the Bill of Entry, whereas in the website it was shown as Tug. In the joint survey by customs, appellant and surveyor M/s. Sai Siddhi Associates as per their report stated that vessel is fitted with winch Double drum having pulling capacity of 30 tonnes which might have used for toeing/pulling/moving/shifting barges in past. As per further statement of Chartered Engineer’s inspector, Mr. Sanket on dated 15-2-2013 it has been stated that the said vessel ‘Happy Success’ was built as a Tug. The appellant did not file bill of entry in respect of import of vessel. Board Circular 58/97, dated 6-11-1997 is not applicable to Indian flag vessel for coastal run whereas it is applicable to foreign flag vessel. He further submits that memorandum of agreement dated 14-3-2006 between appellant and foreign supplier described the vessel as ‘Steel Tug MV Navis Success’ therefore vessel is Tug and not a ‘supply vessel’. It is his submission that Tug is classifiable under CTH 8904 as per Rule 3(a) of the General Rules for Interpretation for First Schedule to Customs Tariff, according to which goods should be classified as per its specific description. In the present case the specific description is Tug and it merits classification under CTH 8904. There is misdeclaration on the part of the appellant as regard the nature of the goods with intention to evade duty. In support of Revenue’s appeal, he submits that show cause notice proposed demand under Section 28 but ld. Commissioner has erred in confirming part demand under Section 125(2) which is not correct being beyond show cause notice. He submits that the ld. Commissioner also erred in imposing penalty of lesser amount under Section 114A as against the total demand of customs duty which is not permissible in the light of Hon’ble Supreme Court judgment in the case of UOI v. Dharmendra Textile Processors and Others [ (S.C.)].
(b) As regard time bar ld. AR submits that since the bill of entry was not filed by the appellant at the time of import, the period of limitation shall not be applicable in this case. Therefore the submission of the appellant that show cause notice was issued after six years eleven months therefore time bar is not correct. Ld. AR in support of his submission placed reliance on following judgments :
(a) Sedco Forex Intl Drilling Inc. v. Commissioner of Customs, Mumbai [ (Tri.-Mum.)]
(b) Sachidananda Banerjee, ACC v. Sitaram Agarwala [ (S.C.)]
(c) Commissioner of Customs v. Jagdish Cancer & Research Centre [ (S.C.)]
(d) Commissioner of Customs (Pre.), Mumbai v. M. Ambalal & Co. [ (S.C.)]
(e) Shipping Corporation of India v. Commissioner of Customs (Import), Mumbai [ (Tri.-Mum.)].
5. We have carefully considered the submissions made by both sides.
6. The main issue to be decided by us is the classification of the vessel and consequential fines, penalties. The ld. Commissioner for holding the classification of the vessel ‘Happy Success’ under CTH 8904 relied upon the following evidences :
(i) Memorandum of agreement dated 14-3-2006 between the seller of the vessel and the appellant wherein the vessel was mentioned as ‘Tug’.
(ii) In the print out of website the vessel was shown as ‘Tug’.
(iii) In Chartered Engineer’s report dated 23-12-2011 though nature of winch double drum and other parts were described as non workable but in a statement which was recorded after more than one year of one inspector of Chartered Engineer namely Shri Sanket stated that the vessel was built as ‘Tug’.
We find that on the contrary, the appellant’s claim of the classification as Supply Vessel under CTH 8901 is based on the following documents/certificates which are not in dispute :
(i) Registration No. 26833-00-A, dated 15 Nov., 2004 of Government of Republic of Panama, Panama Maritime Authority, Directorate General of Merchant Marine, wherein in the column of ‘type of survey’ in respect of the subject vessel is mentioned as ‘Supply’.
(ii) Certificate No. 10026, dated 15 January, 2010 issued by Registrar of Shipping, wherein after survey of the vessel conducted on 17 September, 2009 the class of vessel was certified as ‘Supply Vessel’.
(iii) Certificate No. 3256, dated 15 April, 2010 issued by Certificate of Indian Registry by the Registrar of Indian Ships, Mumbai wherein in the column of ‘framework and description of ship’ it has been stated as “Steel/Offshore Supply Vessel/Single Hull”.
(iv) Certificate No. DGS/DOC/10/087, dated 6 July, 2010 issued by Dy. Chief Surveyor with Govt. of India, Director General of Shipping wherein the description of vessel has been shown as “Other Cargo Ship (Offshore Supply Vessel)”.
(v) Certificate No. 3256, dated 8 September, 2004 issued by Certificate of Indian Registry by the Registrar of Indian Ships Mumbai, wherein in the column of ‘framework and description of ship’ has been stated as “Steel/OSV”.
(vi) Licence No. GEN-330/06, dated 3-11-2006 issued by Government of India, Ministry of Shipping, Directorate General of Shipping shows the description of the vessel “Offshore Supply Vessel”.
On analysis of all the above statutory documents, we find that various statutory authorities have categorically certified the description of subject vessel as ‘Supply Vessel’. In the certificates shown at Sl. No. (i), (ii) and (iv) above, the survey of the vessel was also conducted and thereafter the classification of subject vessel was made as ‘Supply Vessel’. On going through the judgments on the identical issues, we find that in the case of Hal Offshore Ltd. (supra), the classification of the vessel was decided on the basis of various certificates of different statutory authorities similarly, in the present case also the same authorities classified the subject vessel as ‘Supply Vessel’. Hence the certification of the various above authorities that the subject vessel is a Supply Vessel is absolutely in the line of the above judgment. In the case of Prince Marine Transport Services Pvt. Ltd., supra this Tribunal held the classification of the vessel as Supply Vessel on the basis of Certification of classification issued by the Indian Registrar of Shipping and the Safety Management Certificate issued by the Indian Registrar of Shipping wherein the vessel was shown to have been registered as Supply Vessel. In view of this settled position, it is clear that when the statutory authorities as listed above have certified the subject vessel as ‘Supply Vessel’ then there is no reason to classify the vessel, differently in other CTH 8904 as held by the ld. Commissioner.
6.1 As regard the evidences relied upon by the Revenue, in the Memorandum of Agreement of purchase of the vessel the vessel was mentioned as Tug. The Managing Director of the appellant-company in his statement dated 29-12-2011 explained that on the first page of the Agreement the vessel is described as “Ocean Going Utility-cum-Offshore Supply Vessel” but at Pages 2 & 4 of the Agreement it was described as “Steel Tug MV NAVIS SUCCESS”. He clarified that this discrepancy is due to inadvertence. We find that in the same agreement “Supply Vessel” was mentioned and the same gets confirmed on the basis of other various certificates, which establish that the Steel Tug was mentioned due to inadvertence. Therefore in our view when statutory bodies classified the vessel as ‘Supply Vessel’, no weightage can be given to an inadvertent mistake appearing in MOA.
6.2 The Commissioner relied upon print out of website wherein the vessel categorized as Offshore Tug/Supply Vessel. The appellants given explanation that though the Offshore Tug was mentioned but it also mentioned as Supply Vessel and the Tug was left to be deleted. In this regard, we observed that the website is neither of the supplier nor of the appellants, it is maintained by some third party. Moreover when there are many statutory authorities certified the subject vessel as Supply Vessel, only unauthenticated website data can not be given credential.
6.3 Regarding Chartered Engineer’s report, it appears to be very ambiguous for the reason that in the first report of dated 26-12-2011 the entire report does not suggest that the vessel is ‘Tug’. The said report also verified the various certificates and endorsed the category of vessel as ‘Supply Vessel’. However, after more than one year the department once again sought clarification on the report. The Chartered Engineer in their further clarificatory report dated 15-2-2013 stated that the vessel was built as ‘Tug’. However at the same time they also confirmed that as per the available log book since 2008 the vessel had performed only supply function and never performed/engaged for towing/anchor handling. Thus the reports gives contrary version. However, from any material it could not be proved that the vessel has ever used as Tug. On the contrary, ample of evidences prove that the vessel is ‘Supply Vessel’ and used as ‘Supply Vessel’. As regard Winch on the vessel, this alone is not sufficient to conclude the classification of the vessel as Tug. In the case of Raj Shipping Agencies Ltd. (supra) a coordinate bench of this Tribunal held that “merely having a winch does not lead to conclusion that the vessel is a tug-supply and passenger ships can also have a winch - Certificates of Indian Registry and the clarification given by the Ministry of Shipping can by no means be discarded”. Following the ratio of this judgment, in the present case also even though the vessel has winch, this will not suffice to hold the classification of vessel as Tug.
6.4 In view of above discussions and settled legal position, we are of the considered view that the subject vessel “Happy Success” is correctly classifiable as ‘Supply Vessel’ falling under CTH 8901 and consequently exempted under Notification No. 21/2002-Cus. The ld. Adjudicating Authority in Para 50 of the impugned order confiscated the vessel on the charge of misdeclaration of classification of subject vessel. However, we held that classification of vessel under CTH 8901 as ‘Supply Vessel’ claimed by the appellant is correct, therefore confiscation of vessel does not survive. As regard non-filing of Bill of Entry, we find that once goods is exempted by customs exemption notification, non-filing of Bill of Entry at the time of import is merely a procedural lapse as there is no mala fide intention of the appellant as no benefit accrues to the appellant by non-filing of Bill of Entry. We agree with the submission of the appellant that at the material period i.e. in 2006 when the vessel was imported there was confusion among the assessees and department regarding filing of Bill of Entry in respect of vessel and the same was clarified by the Board vide clarification letter F. No. 450/79/2010-CUS-IV, dated 25-9-2010. Therefore, prior to the issuance of said clarification, non-filing of bill of entry is under the bona fide belief. Moreover, in the present case, the shipping agent of the appellant vide letter dated 6-11-2006 informed the Assistant Commissioner of Customs (Export) the details about the subject vessel and also filed IGM and Bill of Entry and paid customs duty on the cargo. The Preventive Officer and Superintendent of Customs Department after joint survey and examination ordered for conversion of vessel on 10-11-2006. Both the aforesaid documents are scanned below :
From the above documents, it is also observed that the Assistant Commissioner could have very well advised the appellant/Shipping Agency to file Bill of Entry in respect of vessel also. We observed from the above that nothing prevented Department in directing the appellant for filing Bill of Entry in respect of subject vessel. Therefore, there is no mala fide and no suppression of fact on the part of the appellant. As per our above discussions, we are of the view that subject vessel ‘Happy Success’ is correctly classifiable as ‘Supply Vessel’ under CTH 8901 and eligible for exemption Notification No. 21/2002-Cus. Hence the impugned order is not sustainable.
6.5 Since we decide the appeal on the merit of the classification issue, we are not addressing other issues such as limitation and dispute that when the show cause notice issued under Section 28, whether the part of the duty can be demanded under Section 28 and partly under Section 125(2) of the Customs Act, 1962.
6.6 Since the demand of duty, penalties, fines, interest etc. are not sustainable against the main appellant, the personal penalties imposed on the Managing Director Shri Prakash Rajaram Hede and on M/s. Preetika Shipping Agency Pvt. Ltd. are also not sustainable.
7. The impugned order is set aside and parties’ appeals are allowed with consequential relief, if any, in accordance with law. Revenue’s Appeal No. C/89972/14-MUM is dismissed. Cross objection also stands disposed of accordingly.
(Order pronounced in Court on 4-12-2015)