By TIOL News Service

MUMBAI, FEB 12, 2015: THE Commissioner of Customs (Import), NCH, Mumbai confirmed a customs duty demand of Rs. 9,24,04,082/- along with interest thereon by classifying vessel ‘Geo Hind Sagar' imported by the appellant under CTH 89051990 as ‘Seismic Survey Vessel'. Penalties have also been imposed in equal measure. It is the claim of the appellant that the vessel is rightly classifiable under CTH 8906.

The appellants are before the CESTAT. The department is also represented by a Special Consultant.

The competing entries are –

8905: Light-Vessels, fire-floats, dredgers, floating cranes, and other vessels the navigability of which is subsidiary to their main function; floating docks; floating or submersible drilling or production platforms.

8906: Other vessels, including warships and lifeboats other than rowing boats

The Bench considered the submissions and after visiting the disputed entries inter alia observed –

Merits, confiscation & Penalty on CHA, importer/officials

++ According to HSN Explanatory Notes, heading 8905 covers vessel which perform their main function in a stationary position. The vessels covered by the said entry include light vessels, fire-floats, dredgers, floating cranes, floating docks; floating or submersible drilling or production platforms and all other vessels which perform their main function in a stationary position.

++ On the contrary the vessel under import undertakes seismic survey of the sea bed and its subterranean surface in large area running into hundreds of square kilometres. Such survey vessels can not obviously perform the function if it remains in a stationary position. This is a material and significant difference in the nature of the function undertaken by ‘Geo Hind Sagar' when compared with the vessels of CTH 8905.

++ If the vessel has to undertake the survey at constant speed and depth, its navigability cannot be said to be subsidiary to its main function and both are equally important. Further as per HSN Explanatory Note, vessels falling under CTH 8906 include scientific research vessels; laboratory ships, etc. within its ambit. It is a settled position in law as held by the apex court in the case of Collector of Central Excise, Shillong vs. Wood Craft Products Ltd - 2002-TIOL-278-SC-CX-LB that for resolving any dispute relating to tariff classification, a safe guide is the internationally accepted nomenclature emerging from the HSN.

++ 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.

++ What can come under CTH 8905 are only such vessels whose navigability is subsidiary to its main function. As observed this condition is not satisfied in the present case and therefore, the principle NOSCITUR A SOCIIS has no application whatsoever to the facts obtaining herein.

++ In our considered view, CTH 8906 which covers scientific research vessels is the most appropriate classification in respect of a seismic research vessel. Since there is no duty liability on the vessels falling under CTH 8906, the entire custom duty demand confirmed in the impugned order completely fails.

++ Consequently the confiscation of the vessel and the penalties imposed on the main appellant and its officials, the CHA, its agent/officials and the surveyor of the Indian Register of Shipping are clearly unsustainable in law and have to be set aside and we do so.

Penalty on Surveyor - remarks:

++ The penalty imposed on the Surveyor of the Indian Register of Shipping is completely bereft of any logic or reason and amounts to abuse of statutory powers. There is no statutory obligation on the Surveyor of the IRS to perform any functions under the Customs Act. If such an authority performs his function under some other statute, even if wrongly, the same cannot amount to any violation of the provisions of the Customs Act. Suffice to say that the finding of the adjudicating authority in this regard is quite perverse and is strongly condemnable. The CBEC and the Chief Commissioner of Customs should issue suitable directions to its sub-ordinate officers so as to prevent mis-use/abuse or quasi-judicial power so that the tax payers at large do not lose confidence in the departmental dispute resolution mechanism.

The Bench also directed the registry to forward a copy of the order to the jurisdictional Chief Commissioner of Customs and to the Chairman, CBEC for appropriate and necessary action.

The appeals were allowed with consequential relief.

(See 2015-TIOL-320-CESTAT-MUM)