2006(02)LCX0160

In the Customs, Excise & Service Tax Appellate Tribunal, Mumbai

Smt. Archana Wadhwa, Member (Judicial) and Shri S.S. Sekhon, Member (Technical)

Arcadia Shipping Ltd. & Ors.

Versus

Commissioner of Customs, Ahmedabad

Final Order Nos. A/337 to 339/WZB/2006/C-II (C.S.T.B.) dt. 23.2.2006 certified on 13.4.2006 in Appeal Nos. C/787 to 789/2000-Mum.

Advocated By -

Shri S.N. Kantawala, Advocate for Appellant
Shri U.H. Jadhav, JDR for Respondent

Per S.S. Sekhon :-

The appellants are agents of M/s. Valentine Maritime (Gulf) LLC, Abu Dhabi (UAE), who had imported barge REGINA-250 in India and M/s. Gujarat Shipping Services, Jamnagar worked as sub-agents for the barge. The said barge was brought to India atSikka Port on contract with a contract of M/ s. Petroleums Ltd. for construction of Oil Jetty, laying Pipelines in sea bed and fixing of Single Buoy Moorings at the Port of Sikka. The barge was brought with Diving Equipments welded onto the barge at Abu Dhabi (UAE), for the project work. The welding was necessary for diving operation to be conducted and was done in December, 1998 at Abu Dhabi prior to the import of the barge, with the said equipment, at Sikka Port in India on 27.12.1998. Duty exemption was claimed by classifying the barge under Heading 8901.90 and Notification 20/99-Cus. dated 28.2.1999 along with diving equipment so welded on to the barge. The barge was granted exemption and the barge was working at Sikka Port for eight months from 27.12.1998 to 27.8.1999.


2. (a) The Deputy Commissioner of Customs observed that the barge with equipment welded on to it was more appropriately to be classified under Heading 8905.20 as floating or submersible drilling or production platform which was not exempted from duty vide Notification No. 20/99-Cus. dated 28.2.1999 and had called the proprietor of M/s. Gujarat Shipping Services, the sub agent of the appellants to make payment of Customs duty with interest The matter was taken up with the Chief Commissioner of Central Excise, Vadodara and the Central Board of Excise & Customs. In the meantime, the barge had completed its mission in August, 1999 and on expiry of the charter was to leave for UAE. They got port clearances and submitted the barge sailing readiness confirmation. However, on 27.8.1999, the Custom Officers seized the barge when it was ready to sail to Abu Dhabi. After conducting enquiry, a Show Cause Notice was issued on 18.1.2000.

(b) The Commissioner, after going through the facts, the Show Cause Notice and the submissions made by the notice found as follows:

"I have carefully gone through the facts of the case, the Show Cause Notice, the relied upon documents and the submissions made by the notices.

The main issue to be decided here is that whether the diving equipments are part of the vessel Regina-250 or otherwise and whether these goods are liable to duly or not.

M/s. Valentine, owner of the vessel and their agents/sub-agents namely M/s. Arcadia Shipping and M/s. Gujarat Shipping have contested the durability of diving equipments on different grounds. As per the arguments advanced by M/s. Arcadia and M/s. Gujarat Shipping Services, diving equipments are not chargeable to duly as these falls under the category of "stores" under Section 2 (38) of the Customs Act, 1962, being movable/immovable gears of the Barge and therefore not chargeable to duty by virtue of Section 86 of the Customs Act, 1962, M/ s. Valentine have claimed that since the diving equipments were welded with the Barge, and thus immovable, he same are not goods and thus, no duty can be charged on them.

Regarding the above contention of the party, I find that all the diving equipments were not welded on the barge Regina 250. As can be seen from the Annexure to the panchnama, the items at Sr. 5, 6, 7 & 10 of S-4 SAT System and Sr.No. 2, 3, 4, 6 & 10 of Ait-Spread were nor welded. The contention of M/s. Arcadia Shipping that diving equipment were not purchased, sold or consigned to anybody in India is incorrect because they were sent to India for temporary period on contract hire basis. These equipment are specialized equipment which were imported into India on a barge Regina 250. Further, the work of the diving equipment was to work in the offshore area and so they were not offloaded on the land mass or port in India. As per (the Supreme Court judgment in case of Chowgule and Co. Pvt. Ltd. Vs. Union of India & Other, 1987 (011) ECR 0481 (Supreme Court) it was held that "if the goods are intended to be primarily used in India and they are bought (into Indian territorial waters, then they fail in the meaning of expression goods for home consumption". Thus the contentions of the party that these equipments are not goods for home consumption and no bill of entry is required to be filed are not correct.

Regarding the diving equipments forming the part of the gears of barge, following points were noted-

(i) it is seen that the diving equipment belong to M/s. Fraser Diving International Ltd., and the barge Regina 250 belong to another company named Valentine Marine L.L.C., Abu Dhabi. As per the list of equipment submitted by the Incharge of Regina-250 which gives a detailed description of machinery/equipment on board Regina 250, these diving equipment were no where mentioned.

(ii) There is separate staff working separately for these diving equipment. The equipment were also managed and operated upon by Mr. Larry Pratt the diving Superintendent. The list of equipments were also submitted separately signed by Shri Larry Pratt.

(iii) No person of the barge Regina 250 was working with diving equipment. The diving equipments were being operated by the separate team of workers for the owners of the diving equipment i.e. Fraser Diving International.

(iv) As per the statement of Shri George Johnson, the diving Superintendent and incharge of all the work done with the diving equipments, the diving equipments on board Regina 250 i.e. S-4 system cannot be part of any barge like Regina 250. He has also stated in his statement that the setting up of the diving equipment on the barge was clone by temporary welding and the temporary welding was for the purpose of sea fastening. He further stated that these diving equipments can easily be transferred from one vessel to another vessel and were generally in containers. Whole container could be lifted and put to other vessels/platforms to do underwater works. He has further stated that these equipment cannot do any other work but diving work and it had limited specialized function and had nothing to do with the barge Regina 250. He further stated that Regina 250 has assisted M/s. Fraser diving only in boarding and lodging facility at the offshore work site on payment for providing such services from their company i.e. M/s. Fraser Diving International. He further stated in his letter that their company had their own generators/compressor and infrastructure facility including stores for maintenance and operation of diving equipment and these diving equipment cannot be maintained with the equipment/stores of Regina 250. He further stated that in case of any assistance required, person in charge of diving equipment indented the services of the barge Regina 250 or its equipment for which in many cases 'separate payments were also required to be made.

From the above, 1 find that these diving equipments are neither part nor moveable/immovable gears of the Regina 250, as clearly discussed above that these equipments belong to a different company, maintained by different company, operated upon by other than ship personnel and other arguments as discussed above.

Further, regarding the comparison of the equipments imported on duly payment by M/s. Saipem UK Sikka, noricees have contended that imported goods stores can only be received for re-export as ship stores to any country outside India by foreign going vessel or foreign flag which are temporarily converted to coastal run and ultimately to proceed to foreign ports. 1 find that even the Indian flag vessel which have been converted into coastal run the stores can be taken duty free as per Section 85 of the Customs Act, 1962. And the Gal Constructor is an ocean going vessel which had been converted into coastal run as is the case with Regina 250. Further, the parts of any ocean going vessel can be imported duty free as per Sr.No. 297 & 299 of the Notification No. 17/2000 dated 01.03.2000. M/s. Saipem U.K. Ltd. could have also availed the benefit of above notification by declaring diving equipment as parts of the Gal Constructor.

In their defence reply, the noticees have contended that the statement of Shri George Johnson being a foreign citizen and not being conversant with Indian laws cannot be relied upon. I find that the statement of Shri George Johnson, Diving; Superintendent has been relied upon only to bring out certain factual aspects regarding the diving equipment. The diving equipments on board of Regina 250 S-4 Diving Equipment and diving equipment on board Gal Constructor was S-5 system. Both of which belong to Fraser Diving International. Shri George Johnson, diving superintendent, was in charge of the work handled by M/s. Fraser Diving International Ltd., Dubai at Sikka.

Further, the noticees have contended that the barge Regina 250 was working for underwater works from 27.12.98 at Sikka for eight months and the Customs Officers were visiting the barge frequently on preventive checks and inspection and no one objected or demanded the list of diving equipments because they were satisfied that these equipments are part of the barge.

From the above discussion it is very clear that these diving equipment cannot form the part of the barge Regina 250. Regarding this I find that, Customs officers visited the barge only for boarding formalities but it was never rummaged. During the boarding formalities the list of diving equipments were not submitted alongwith the IGM, while the list of all other equipments of Regina 250 was submitted. The Custom officers are not technically conversant with the equipments employed by barges and whether they form par t of the barge or are an equipment taken on hire. Their visit thus cannot absolve the importers of the offence of misdeclaring or not declaring the correct facts. A similar view was taken by the Honourable Supreme Court in the case of Jaishree Engg. Vs. Collector, 1989(03)LCX0025 Eq 1989 (040) ELT 0214 (SC). So I find that the party's contention that there is no mis-declaration or suppression by them is not correct and therefore, extended period is invocable.

In defence reply, the other noticees i.e. M/s. Valentine Maritime Ltd., Abu Dhabi and Mr. Gerald James Armayo, have stated, other than the above mentioned documents that the bill of entry for these equipments should have been filed by M/s. Saipem UK Ltd., and duty should have been paid by them. Further they have contended that alternatively, since the department had regarded Fraser Diving International as the owners of the diving equipments the department ought to have proceeded against them. I find that as per the statements of the diving superintendents and various replies of M/s. Arcadia Shipping it is clear that these equipments were given on contract basis to Regina-250 i.e. Valentine Maritime for Reliance Port Work. Further, I find that Bill of Entry regarding the consumables stores for working and use of diving equipment was also filed by their agent. A bank guarantee and bond was also filed by them. They therefore became the importer of these goods as is also evident from Section 2 (26) of the Customs Act, 1962 under which an importer includes any person holding himself out to be owner. In view of the above discussions and findings; I find that these diving equipments are liable to payment of duty and are liable to confiscation under Section 111 (d) (f) and (i) of the Customs Act, 1962 and consequently, Derric Lay Barge Regina-250 of Panama Flag having been used for carriage of the said goods is also liable for confiscation under Section 115 of the Customs Act, 1962.

I, further, find that incharge superintendent of Derric Lay Barge Regina-250 and his agent M/s. Gujarat Shipping Services, Jamnagar have suppressed the facts and thereby knowingly evaded customs duty. Thus, they are liable to personal penalty under Section 112 of the Customs Act, 1962. In view of the above, I pass the following order."

The confiscation of the said barge under the provisions of Section 115 of the Customs Act, 1962 and appropriation ordered of an amount of Rs. 5.00 lakhs towards realization of the fine from the Bond executed at the time of provisional release. Since duty was found to be evaded by suppression of facts, penalty equivalent to Rs. 21,95,520/- under Section 114A was also imposed along with penalty of Rs. 1.00 lakhs on Shri Gerald James Armayo in terms of Section 112 of the Customs Act, 1962 and also a personal penalty of Rs. 25,000/ - on M/s. Gujarat Shipping Services. Hence these appeals.


3. The classification of a barge with the said equipment welded on it, would render such equipment to be, ship stores or and/or part of the vessel granted entry inward. The classification of the said barge under 8905.20 as opined by the Deputy Commissioner does not appear to be called for and
approved as the entry 8905.20 reads as:

"Floating or submersible drilling or production platforms."

& reading the HSN Notes on 'Floating or submersible drilling or production platform' and the exclusion clauses thereunder will not bring in a barge with diving gear welded in part & full with the unwelded onboard ship stores, under this entry, since, the entities thereunder would be primarily to have equipment for drilling before they get classified under sub heading 8905.20. The heading 8905.20 will thus not cover the "barge" under import. Examining 8901, especially 8901.90 would call for the classification of the subject "barge" when the HSN notes under heading 89.01 are read:

"(6) Barges of various kinds…."
since the notes read and cover all kinds of barges as there is no finding arrived at the entity is not a barge of a kind.


4. Ship stores and tackle, on a Barge, for the use for the purpose of the Barge has to serve, would be always kept onboard as required and used. Therefore, the finding that only some part of the Diving Equipment was welded & not all parts & the persons who were to use the equipment were not on the barge are issues not relevant to determine the equipment to be part of ship stores or/and part of barge when welded. Such stores & parts of the Barge when not removed from the vessel would not be liable to any duty as arrived at by the Ld. Commissioner when the stipulation of Section 86 (1) are read which are -

"86 (1) Any stores imported in a vessel or aircraft may, without payment of duty remain onboard such vessel or aircraft while it is in India."

The finding to the effect, that equipments are neither part or moveable/ immovable goods of the said barge and belong to a different company, is not factually correct since certain equipment is welded & certain not welded & is movable and ownership thereof is not material. The definition of stores in Section 2 (38) of the Customs Act, 1962 which reads as-

"2 (38) "Stores" means goods for us in a vessel or aircraft and includes fuel and spare parts and other articles of equipment, whether or not for immediate filtering."

Would indicate a wide range of equipment, 'for use in the vessel fitted or not.' to be included and covered when read with Section 86 (1) of the Customs Act, 1962. The definition does not stipulate ownership boundaries to be material. The test is "for use in a vessel" & that test is not in context used in the vessel' as equipment was found in use on/in the vessel, in tandem with other equipment on other vessels, or stand alone. Duty and confiscation liability as arrived is therefore not sustainable.


5. The confiscation liability and duty liability is also not upheld since Diving Equipment is claimed to be exempt under Notification Sr.No. 297 & 299 which was made before the Commissioner and no finding in that regard has been arrived at by the Commissioner refuting such a claim.


6. No prohibitions, as regards the said equipment, to call for confiscation under Section 111 (d) are found. As regards liability for non mention under import manifest i.e. Section 111 (f), as arrived, the same cannot be upheld, since there is no categorical specific finding arrived at of any provision of Import Manifest (vessels) Regulations, 1971. As regards violation of Section 111 (i). The violation can be for non mention of any dutiable or prohibited goods found concealed in any package before or after unloading. The Diving equipment is welded and/or loose, found & kept onboard the barge, it is not found concealed in any package, the liability to confiscation under Section 111 (i) therefore cannot be upheld for upholding confiscation under Section 111 (1), the non declaration of the said equipment, should have been on a entry made under the Act. 'Entry' vide Section 2 (16) is defined in relation to goods is to mean an entry made in a bill of entry in case of imports of goods by sea. Since ship stores loose or part of ship (when welded on to the Barge) need no Bill of Entry declarations to be filed/declared, confiscation liability under Section 111 (1) cannot be upheld.


7. When no confiscation of the equipment is being upheld & no duty demands sustained, the confiscation of the Barge under Section 115 of the Customs Act, 1962 cannot be arrived, ordered and or upheld.


8. When confiscation of the Equipment, Barge and duty demand are not being upheld, there can be no reason to uphold the penalty under Sections 112 & or 114A, as arrived & ordered, in the impugned order. Similarly, there can be no redemption fine to be called for.


9. In view of the findings, the order is set aside and appeals allowed.

Pronounced in Court

Equivalent 2006 (074) RLT 0320 (CESTAT-Mum.)

Equivalent 2006 (201) ELT 0139 (Tri. - Mumbai)