By TIOL News Service

MUMBAI, DEC 12, 2014: THE Commissioner of Customs (Imports), Mumbai classified the Tug/Supply Vessels "Sea Cheetah" and "Sea Venture" imported by the appellant under CTH 8904 and confirmed differential duty demands of Rs.9,08,68,858.87 and Rs.62,88,264/- respectively by invoking the extended period of time. Further, he also imposed penalties u/s 114A, 112(a) & 114AA on various persons who are all before the CESTAT along with the appellant.

The appellant submits that they had filed documents such as invoices, packing list, bill of lading, sale bill and the Indian Register of Shipping certificate at the time of assessment; the vessels were examined by the Customs on first check basis and thereafter, the goods were assessed to duty as per the claim of the appellant under CTH 89019000 as vessels for the transport of goods and persons.

Subsequently, SCNs were issued for re-classification of the vessels by invoking extended period, demanding differential duty and proposing imposition of penalties. These notices were adjudicated by the impugned order and since the proposals were confirmed, the appellants are before the CESTAT.

It is inter alia submitted that in the facts of the case the charge of misdeclaration is not tenable and since the vessels were boarded by the Customs (Prev.) staff and examined and pursuant thereto the assessment was done, there cannot be any suppression alleged on their part. Furthermore, another anchor handling tug cum supply vessel imported earlier was classified under CTH 8901 9000; eligible for duty exemption notification 21/2002-Cus and this order of the appellate authority since not challenged had become final; that merely because the vessels under import have the capability of anchor handling/towing it does not cease to be a supply vessel.

The CHA and its officials, against whom penalties were imposed, submitted that the charge of abetment and evasion of duty by the CHA does not arise as the CHA had filed the bill of entry based on the documents given to them; that the vessels were boarded and examined before assessment was done and the classification claimed by the appellant was approved by the assessing officer.

The Bench asked the Spl. Consultant appearing for the Revenue to argue on the time bar aspect pleaded by the appellant and to which it was submitted that in the case of "Sea Cheetah", the demands have been made u/s 28 and, since importer had misdeclared the goods and not furnished full details, invocation of extended period is justified; whereas in the case of "Sea Venture", the vessel was seized and provisionally released and subsequently, the vessel was held liable to confiscation under Section 111(m); option to pay fine in lieu of confiscation was granted u/s 125(1) & no time limit has been prescribed for demand of duty u/s 125(1) of Customs Act, 1962, the differential duty demand in the case of "Sea Venture" would sustain.

The Bench observed -

Limitation

++ At the time of original importation and assessment, the appellant had furnished invoices, packing lists, bill of sale and certificate from the Indian Register of Shipping. Further the goods were also examined on first check basis by the customs authorities by boarding the vessel. Therefore, it cannot be said that the Customs officers did not know what the goods under import were, that is, whether it is only a mere supply vessel or it is also capable of anchor handing. Further, the certificate issued by the Indian Register of Shipping clearly described the class of the vessel as tug/supply vessel. In other words, the towing capability of the vessel was clearly indicated in the certificate issued by the Indian Register of Shipping. Further in the bill of sale which was submitted along with import documents, it is clearly shown that the vessel is an anchor handling tug/supply vessel. Therefore, it cannot be said that the assessing authority did not know the nature of the vessels under importation. Even in the Lloyds register which is mentioned in the Indian Register of Shipping, the vessel is shown as offshore tug/supply ship. Therefore, if the department wanted to classify the vessel under CTH 8904, they should have done the same when the bills of entry were filed along with other import documents for the purposes of assessment which they failed to do. Further, it is seen that in the appellant's own case the lower appellate authority had classified the anchor handling tug/supply vessel under CTH 89019000 as a cargo vessel. This order of the lower appellate authority was not challenged by the Revenue and had attained finality. In these circumstances, the appellant could have entertained a bonafide belief that the goods under importation merited classification under CTH 8901.

Relying upon the decisions in Northern Plastics Ltd. - 2002-TIOL-604-SC-CUS & Uniworth Textiles Ltd. - 2013-TIOL-13-SC-CUS the Bench observed that the burden of proving any form of mala fide lies on the shoulders of the one alleging it; since the SCNs have been issued only in 2012 in respect of the imports made in 2008 and 2009, the demands are clearly time barred and therefore, the question of confirming differential duty would not arise at all.

Duty demand & Penalties

As regards the argument that since one of the vessels were seized and confiscated and allowed to be redeemed, there is no time limit for demand of duty, the Bench did not subscribe to this view by observing that once the assessment had been completed by the customs u/s 17, the demand for differential duty on account of short levy or non-levy has to be made u/s 28 only and not under any other provision. Since it is already held that there was no misdeclaration on the part of the appellant and confiscation under the said section is not justified, the question of giving any option of redemption or payment of duty at the time of redemption would not arise at all; penalties imposed on the appellant and its official are also not sustainable in law.

In the matter of penalties imposed on the CHA, the Bench observed that it found no justification for such an imposition inasmuch as the CHA had acted based on its understanding of the law and on the basis of the documents given and had classified the vessels under CTH 8901; that the CHA had specifically asked for assessment on first check basis, that is examination first and assessment later which was also acceded to and, therefore, in the circumstances the CHA could not be said to have aided or abetted evasion of duty by the importer. The imposition of penalties on the CHA and its official were held to be clearly unsustainable in law.

The appeals were allowed with consequential relief.

(See 2014-TIOL-2514-CESTAT-MUM)