1998(04)LCX0061

IN THE CEGAT, COURT NO. II, NEW DELHI

S/Shri Lajja Ram, Member (T) and S.S. Kang, Member (J)

URMILA & CO. PVT. LTD.

Versus

COLLECTOR OF CUSTOMS, BOMBAY

Final Order No. C/235/98-B2, dated 21-4-1998 in Appeal No. C/662/88-B2

Advocated By : S/Shri Joseph Vellapally, Senior Advocate with Anurabh Chaudhary, Advocate, for the Appellant.

Shri R.S. Sangia, JDR, for the Respondent.

[Order per : Lajja Ram, Member (T)]. - In this appeal filed by M/s. Urmila & Co. Pvt. Ltd., the matter relates to the classification and eligibility for exemption under Notification No. 133/87-Cus., dated 19-3-1987 of the vessel S S Star of Gallice, also called LIA DEE, described in the Bill of Entry dated 31-12-1987 as “Cabin Cruiser-cum-Survey Boat”. In the certificate of the British Registry, the vessel had been registered as a “Pleasure Yacht”. It was found to be fitted with (1) air conditioned bedrooms, bathrooms, pantry etc. and centrally air-conditioned main and bottom decks; (2) colour television and Video Cassette Recorder; (3) Music System; (4) Bar fridge and fully equipped galley; (5) inflatable skiboat, wind surfer etc. It was alleged in the show cause notice dated 24-2-1988 that the vessel imported was a pleasure yacht classifiable under sub-heading No. 8903.99 of the Customs Tariff and was not eligible for the benefit of Notification No. 133/87-Cus. The appellants had claimed assessment under sub-heading No. 8901.10. In reply to the show cause notice, alternative classifications had been sought under sub-heading No. 8905.90 or sub-heading No. 8906.00. The matter was adjudicated by the Collector of Customs, Bombay, who under his order-in-original dated 1-7-1988 held that the imported vessel was classifiable under sub-heading No. 8903.99 and was not eligible for the benefit of exemption under Notification No. 133/87-Cus., dated 19-3-1987.

2. The matter was heard on 4-3-1998 when Shri Joseph Vellapally, Sr. Advocate with Shri Anurabh Chaudhary, Advocate, appeared for the Appellants. Shri R.S. Sangia, JDR, represented the Respondents/Revenue.

3. Shri Joseph Vellapally, Sr. Advocate, stated that the vessel was imported by the appellants for conducting surveys and for that purpose the survey equipment had been placed on the board of the vessel. He referred to the certificate dated 16-2-1988 by the Marine Consultancy Services wherein it had been certified by the Naval Architect that the vessel was adequately fitted with necessary equipments for position fixing and depth survey and was found suitable for charting the river bed or inland waters for determination of safe nagivation route. A reference was made to the Import Licence dated 25-6-1987 and the Certificate of Registry dated 10-2-1988 given by Registrar of Indian Ships wherein the vessel had been referred to as the Cabin Cruiser cum Survey Boat. The sponsoring Ministry, the Ministry of Shipping and Transport had recommended on 29-10-1986 their case for import of Cabin Cruiser cum Speed Boat. The learned Senior Advocate also referred to the certificate dated 29-7-1986 from the Chartered Engineer who had inspected the vessel and had noted the relevant information, regarding the said vessel. He pleaded that as the use of the vessel was for survey purposes, it could not be taken as Pleasure Boat. It was, however, admitted that in the year 1979, the vessel had been registered as pleasure yacht by the British Registry and that its original use may have been for pleasure.

4. Shri R.S. Sangia, JDR, in reply submitted that on its completion of manufacture, the vessel had been registered as Pleasure Yacht by the British Shipping Registry. It was specially structured and designed for use as a pleasure yacht. Even if it was used for survey, its basic character as Pleasure Yacht could not be lost. The survey instruments were portable and they in no way determine the character of the vessel. It was his plea that the design of the vessel was an important criteria for its classification.

5. We have carefully considered the matter. The issue for our consider- ation in this appeal is, whether the vessel imported was or was not a vessel for pleasure which was classifiable under Heading No. 89.03 of the Customs Tariff. If it was classifiable under Heading No. 89.03 of the said Tariff, then it was not eligible for the benefit of exemption Notification No. 133/87-Cus., dated 19-3-1987.

6. M/s. Urmila & Co. Pvt. Ltd. had imported the vessel, named, SS Star of Gallice which they described in the Bill of Entry dated 31-12-1987 as “Used Cabin Cruiser cum Survey Boat. They classified the vessel under sub-heading No. 8901.10 of the Tariff which covered ”Cruise ships, excursion boats and similar vessels principally designed for the transport of persons; ferry boats of all kinds". For clearance of the said vessel, the importers, among other documents, submitted a copy of the British Registry wherein the vessel had been registered as Pleasure Yacht. A copy of the certificate from the British Registry is placed at page 214 of the Paper Book. It describes the various particulars of the vessel. Against framework and description of vessel, it has been recorded as “wood-pleasure yacht”. The pleasure yacht was not classifiable under sub-heading No. 8901.10 but under sub-heading No. 8903.00. The vessel was examined by the Customs and it was found to be equipped with the following items :-

(1) air conditioned bedrooms, bathrooms, pantry etc.

(2) coloured television set make allyone

(3) video cassette recorder, model No. US 700 TC

(4) music system throughout vessel

(5) bar fridge

(6) fully equipped galley

(7) inflatable skiboat

(8) wind surfer, and

(9) snorkeling gear.

7. The following items were also found lying on the floor of the yacht :-

(1) Fathom Meter (small, old and used)

(2) Side Scan Sonar

(3) Recording Current Meter

They were old and used and were not fitted to any part of the yacht.

8. In the various communications relied upon by the appellants and referred to in support of their claim that the vessel imported was not a vessel for pleasure, the vessel had been referred to as Cabin Cruiser cum Speed Boat and Cabin Cruiser cum Survey Boat. In the communication dated 29-10-1986 from the Ministry of Shipping and Transport, Mercantile Marine Department, addressed to the Chief Controller of Imports and Exports, the vessel had been referred to as the Cabin Cruiser cum Speed Boat. In the certificate dated 23-12-1986 given by the Managing Director of the Appellants’ Company, the vessel had been referred to as Cabin Cruiser cum Speed Boat. Cabin Cruiser is a motor boat having a cabin and equipped with berths, cooking and other facilities for living on board. According to the World Book Dictionary, cruiser is a person who sails about, travels or vacations on a pleasure boat. Pleasure boat has been defined as a boat designed or used for pleasure. Boat is generally a vessel smaller than ship. Boating brings pleasure to the people. The boats meant for boating for pleasure do not carry cargoes or passengers for commercial purposes. The boats powered by motor, range in length from about 10 ft to over 120 ft. Boats longer than 30 ft are often called yachts. These large boats have such built in features as beds, galleys and heads (toilets). The speed boat is a motor boat built to go fast, especially for use on lakes and rivers.

9. Survey is a general term and connotes the process of determining, the position, extant, contour etc. of an area usually for the purpose of preparing a chart. There is no separate classification for boats used for survey. It is the basic design of the vessel that determines its classification. A pleasure boat will not cease to be a pleasure boat even when it is used for survey purposes.

10. Under the scheme of the Customs Tariff ships, boats and floating structures were covered by Chapter 89 of the Customs Tariff. From the reading of the Tariff entries, it is seen that it is the basic design providing for its essential character as to make it a vessel of a particular kind (keeping in view the main function which the vessel was required to discharge) that determines the classification of the particular vessel. At the time of the construction of the vessel, the main function which it is required to discharge guides the design. The conception and design of the vessel rather than its use is the determining factor. The classification of a vessel may not generally change, unless structural changes are effected, by its use by a particular customer for a purpose other than the purpose for which it is designed.

11. Under Heading No. 89.03 of the Customs Tariff, yachts and other vessels for pleasure or sports; rowing boats and canoes were covered. Under Chapter 89 the vessels were to be classified on the basis of their basic design. Their essential character and main function had to be related to the design as to be of a particular kind (refer Chapter Note 1 of Chapter 89). There are vessels for the transport of persons or goods; there are fishing vessels, factory ships and vessels for processing or preserving fishery products, tugs and pusher craft etc. There is nothing like survey boats as such.

12. The vessel under consideration was built in the year 1979 in Rome, Italy and was registered in the year 1980 in UK as pleasure yacht. Its engines were overhauled in June, 1986 and the accommodation cabins of passengers and crew were refurbished and reconditioned. There was no indication that the basic design or the essential character of the vessel had undergone any change.

13. The appellants have referred to the classification regulations at Page 44 of the paper book. According to these rules and regulations for classification of yachts and small crafts, yachts are considered to be pleasure craft not engaged in trade. According to the dictionary meaning, yacht is a light vessel for pleasure trips or racing equipped with sails or engines or both for sailing or racing. It is not a vessel for carrying persons or goods for commercial purposes. The boating by yacht is for non-commercial purposes, for enjoying the boating for its own sake. The classification depended upon the standard of construction, materials and workmanship of the hull, machinery and their essential appliances as prescribed by the rules and requirements of the authority for the registration of shipping.

14. The appellants had claimed classification of the vessel under sub-heading No. 8901.10 of the Customs Tariff which covered the cruise ships, excursion boats and similar vessels principally designed for the transport of persons; ferry boats of all kinds. Heading No. 89.01 covered the vessels for the transport of persons or goods. The vessels designed primarily for the conveyance of personal or goods are covered by this heading. Even on their own admission, the vessel in question was not for the conveyance of personal or goods. According to the Chartered Engineer’s Certificate dated 29-7-1986 at Page 125 of the Paper Book, the cabin cruiser was equipped with six passenger and three men crew. According to the certificate of survey dated 26-2-1988 issued by the Mercantile Marine Department, the ship was fit to carry 6 saloon passengers. The main deck could carry 14 persons in fair weather and only 7 persons in foul weather. The crew was only of 3 persons. It was equipped with two life crafts of 4 persons each, and 1 rescue boat of 6 persons. From all these records, it is clear that the vessel in question was not for the conveyance of personal or goods for commercial purposes.

15. Under Notification No. 133/87-Cus., dated 19-3-1987 the goods falling under sub-heading No. 8901.10, 8901.20, 8901.30, 8901.90, 8902.00, 8904.00, 8905.10, 8905.90 and 8906.00 of the Customs Tariff were exempted from the payment of duty subject to the certain conditions as provided in the notification itself. The goods classifiable under Heading No. 89.03 were not eligible for such exemption.

16. The appellants had submitted that the vessel imported by them was classifiable alteratively under Chapter sub-heading 8905.90 or under Chapter sub-heading No. 8906.00 or sub-heading No. 8901.90. Heading No. 89.05 is for 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. sub-heading No. 8905.90 is residuary sub-heading. Heading No. 89.06 covers vessels not covered elsewhere including war ships and life boats other than rowing boats. sub-heading No. 8901.90 is for vessels other than those covered by sub-heading No. 8901.10, 8901.20 and 8901.30 for the transport of goods and other vessels to the transport of both persons and goods. None of these headings, sub-headings cover the vessel in question. We do not find any specific mention of any vessel known as survey vessel. They had to fit in with the scheme of the tariff and the use of the vessel is relevant for the classification only when such use is referred to in the tariff entry.

17. On the consideration of the examination report, the characteristics and features of the vessel as on record, the Collector of Customs, Bombay, had referred to a number of facilities which led to the conclusion that the imported vessel was a vessel for pleasure. Para 14 from the impugned order-in-original is extracted below :

“14. From the above, I hold that there is overwhelming evidence to hold that the imported goods are classifiable under Heading 89.03 Schedule I CTA, 1975. I hold that to decide what is the nature of the import of goods it is necessary to go by the intention of the manufacturer, the purpose for which it has been designed, and whether such a design or character of vessel of the original manufacturer was subsequently substantially changed or altered in such a way as not to recognise its original design, structure or character for classification, or whether the effect of the changes if any, made on the boat have made substantial changes in its design, structure and other features to be considered as a survey vessel. I hold that the importer has not lead such specific or substantive evidence to accept their contention that the character of the vessel as built by the original builder had been permanently changed. Accordingly, I reject their contention to classify it as other than yacht. In view of my findings, I hold that based on its original design, manufacture intention, shipping registration and other features noticed on inspection and the data available on records, the imported vessel is correctly classifiable as a `Pleasure Yacht’ under Heading 8903.99 Schedule I CTA, 1975.”

18. We have already referred to above that the vessel in question was designed and registered as a vessel for pleasure. Its fittings, fixtures and equipment indicated that it was usable not for carrying cargoes or passengers for commercial purposes but was for vacation, enjoyment etc. The items for survey which were not part of the basic design of the vessel could not change the character and classification of the vessel.

19. Taking all the relevant facts and considerations into account, we do not find any merit in this appeal and the same is rejected.

Equivalent 1998 (104) ELT 97 (Tribunal)