2007(03)LCX0024

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

Shri M.V. Ravindran, Member (Judicial) and Shri Veeraiyan, Member (Technical)

Hussain Sheth Ship Breakers Pvt. Ltd. & Anr.

Versus

Commissioner of Customs, Ahmedabad

Final Order Nos. A/533 & 534/WZB/Ahmd/2007-CII dt. 7.3.2007 certified on 20.3.2007 in Appeal Nos. C/574 & 575/2002

Advocated By -

Shri C. Hari Shankar, Adv. for Appellants
Shri M.K. Rajak SDR for Respondent

Per M. Veeraiyan :

These appeals are against the order of the Commissioner No. 20/ Commr./2002 dated 28.3.2002.

2. Heard both sides.

3. The relevant facts in brief are as follows:

(a). The appellant company imported one vessel by name M.V. ELNAGAR, which was a converted cement carrier, for the purpose of ship breaking in pursuance of an agreement dated 5.10.2000.

(b) The vessel arrived on 19.10.2000 and was boarded by the Customs officers on 21.10.2000 and Bill of Entry for vessel was filed claiming classification under Tariff Heading 8908.00. On completion of assessment and on payment of duty of Rs. 2,04,00,660/- out of charge was given to the vessel on 6.11.2000.

(c) The appellant company removed oil, fixtures, fittings, cabin, propellers, cylo, engine machineries, piping, ducting, cables, panels, motors, conveyor belts, cranes, hoper tanks, overhead cranes, generator sets, roots blowers, superstructures and bridge section. Thereafter, they removed hold Nos. 1 & 2, for peak section, bag houses, dust collectors, vaccum pumps, air compressors, cargo compressors, topside tanks, lower plate strake, pipe runnel, double bottom content, unnecessary partition, corroded plates, ladders, life boats etc. They have also removed certain items like partition, tanks, pipings from the hold Nos. 3, 4 & 5.

(d) . Since the vessel is a specially designed cement carrier, it had cement packing plant, which occupied the hold 3,4 & 5. The entire length of ship was 192.073 Mtrs. out of which two side portions have been broken and 93 mtrs. of centre piece, which contained the cement packing plant was not demolished. In other words, the vessel was cut from both sides leaving in between the cement packing plant intact and making it ready for floating.

(e) Saurashtra Cement Ltd. were interested in buying the cement; packing plant and accordingly, the deal was finalized between M/ Steel Fab Enterprises, agent of Saurashtra Cement Ltd. and the appellants on 5.12.2000 for selling the cement packing plant at a price of about Rs. 7 crores. With a view to transport through sea certain fabrication work was done on the cement packing plant.

(f) Central Excise registration certificate was amended incorporating the cement packing plant on 19.3.2001 and on 24.4.2001, No Objection Certificate was issued by the jurisdictional Superintendent.

(g) However, on 27.4.2001, "partly broken vessel" was seized and on the basis of investigation conducted, show cause notice was issued holding that the "partly broken vessel", which was sought to be removed should be treated as a vessel falling under Tariff Heading 8901, and the same was confiscated with an option to redeem the same on payment of fine of Rs. 50 lakhs; the total duty payable was determined as Rs. 3,29,39,999/- and consequently a differential duty of Rs. 1,25,39,339/- was demanded. A sum of Rs. 3,29,39,999/ - was imposed as penalty on the appellant company under Section 114A. A penalty of Rs. 10 lakhs was imposed on Shri Nazir Hussain Kaliwal, the Director of the appellant company.


4. The ld. Advocate for the appellants submits that as per Bill of Entry filed on 24.11.2000, they have undertaken the ship breaking; many parts including the engines, navigation equipments, propellers etc. were removed; however, the vessel was cut from both sides leaving in between the cement packing plant intact and certain fabrication work was done for the purpose of transporting of cement packing plant. The cement packing plant, which was sought to be removed as a floating structure cannot be considered as a ship falling under tariff heading 8901 and subject to duty. Further, it cannot be held that they have not undertaken the ship breaking, the demand of differential duty and imposition of penalty is not warranted. At any rate, the demand of duty invoking extended period of limitation is not legal as in the given facts and circumstances of the case, there is no suppression or mis-statement involved.


5. The learned SDR took us through the various findings of the Commissioner and submitted that ship was not fully demolished as per agreement dated 5.10.2000. They have undertaken the re-fabrication work on the "partly broken vessel", which is not envisaged; such re-fabrication is not permitted in the port, which is earmarked for ship breaking.


6. We have carefully considered the rival submissions. The main issue to be decided is whether the ship, which was brought by them to the Alang Port has been subjected to "ship breaking". At the outset, it should be remembered that nobody sells a ship, which is sea-worthy for the purpose of ship breaking. It is noticed that the vessel was cut from both sides leaving in between the cement packing plant intact. It is also noticed that all other major parts and components of the ship have been removed by the appellant. What was left after removal of various machinery including the engine, propeller, navigation equipments cannot be treated as a ship. The ship breaking does not mean that even retrievable article; machinery should be demolished in toto. What was left over was no doubt a high valued cement packing plant. The Commissioner has taken a view that if the cement packing plant was dismantled and removed as parts or sub assemblies then the ship breaking would have been completed. It the cement packing plant could be used as such without further dismantling there could be no bar to such use and such non-dismantling does not imply that the ship was not broken. Merely because the cement packing plant with a little fabrication is sought to be sold of and sought to be transported as a floating structure with the help of a towing vessel, the "partially broken vessel' cannot be treated as a vessel falling under tariff heading 8901 as held by the Commissioner. It is appropriate to re-produce the Tariff Heading 8901, which reads as follows:-

"8901Cruise ships, excursion boats, ferryboats, cargo ships, barges and similar vessels for the transport of persons or goods."

The partially broken vessel, which is basically a cement packing plant in a floating form cannot be considered to be a vessel for the transport of persons or goods. This floating structure cannot move on its own and requires to be towed. Since this item cannot be held as a vessel it follows that the original vessel, which was brought for ship breaking has been subject to the process of ship breaking. The demand of duty on the remnant of the vessel, which is a cement packing plant as a ship under tariff heading 8901 is incorrect. Therefore, the order of the Commissioner is not sustainable.


7. Accordingly, the impugned order is set aside and the appeals are allowed with consequential relief, if any.

Dictated and pronounced in open Court.

Equivalent 2007 (079) RLT 0870 (CESTAT-Ahmd.)

Equivalent 2007 (118) ECC 0178

Equivalent 2007 (144) ECR 0178 (Tri.- Ahmedabad)

Equivalent 2007 (213) ELT 0276 (Tri.- Ahmd.)