CHIDAMBARAM SHIP CARE P. LTD. Vs. CCE

JUDGEMENT

(1.) M /s. Chidambaram Ship Care Pvt. Ltd. (CSCPL for short), appellants in appeal No. C/371/02, had imported, through Chennai airport, "Global Marine Distress Safety System equipments (hereinafter referred to as "the subject equipments") and cleared the same during January -February 1999 under nine Bills of Entry by claiming exemption under Notification No. 23/98 -Cus. dated 2.6.1998 (SI. No. 227) and executing a Bond -cum -Bank Guarantee for full duty at effective rate. They had declared the subject equipments as "ship spares" imported for repairs of Ocean -going vessels. The equipments were installed in the ships of M/s. Essar Shipping Ltd. Later on, it appeared to the department from there results of investigations that the subject equipments had been misdeclared with intent to avail the benefit of exemption under the above Notification and were not used for any repair of ship. Therefore, a show -cause notice was issued to M/s. CSCPL on 25.6.2001 proposing to confiscate the subject equipments under Section 111 of the Customs Act as also to recover Customs duty on the goods from the said Company under the first proviso to Section 28(1) of the Customs Act with interest thereon under Section 28AB of the Act. The same show -cause notice proposed to impose penalty on Shri K. Chidambaram, Managing Director of the Company, appellant in Appeal No. C/372/2002, and also on M/s. Essar Shipping Limited (ESL for short) appellants in C/370/2002. The proposals in the show -cause notice were contested by the notices. The Commissioner of Customs (Air), Chennai, who adjudicated the dispute confirmed the demand of duty (Rs. 28,37,396/ -) against CSCPL by invoking the extended period of limitation under the first proviso to Section 28(1) of the Customs Act, 1962, with interest thereon under Section 28AB of the Act, and appropriated the amount of Rs. 24 lakhs deposited by the party, towards the demand. The Commissioner also imposed a penalty of Rs. 28,37,396/ - on CSCPL under Section 114A of the Act. She also imposed a penalty of Rs. 5 lakhs on Shri K. Chidambaram under Section 112(a) of the Act. A separate penalty of Rs. 25 lakhs was also imposed on M/s. ESL under Section 112(a) and (b) of the Act. This order of the Commissioner is under challenge in these appeals.

(2.) HEARD both sides. Shri R. Raghavan, Id. Counsel for the main appellant, M/s. CSCPL, submitted that Id. Commissioner had denied the benefit of exemption under SI. No. 227 of Notification No. 23/98 -Cus. to them by misinterpreting the said entry in the Notification. The word "repair" in the said entry was grossly misunderstood and misinterpreted by the Commissioner by wrongly relying on its dictionary meaning. The subject equipments were used for upgrading the radio communication and navigation equipments in the ship for making the vessel seaworthy as required under I MO regulations. The fitment of the equipments to make the ship seaworthy amounted to "repair". Hence the subject equipmetns fully answered the description of goods at SI. No. 227 of Notification No. 23/98 -Cus. and there was no misdeclaration of the imported goods in this case. The goods were correctly declared as ship spares for repair of ocean -going vessels. Ld. Counsel relied on the Tribunal's decision in A.S. Moloobhoy and Sons v. CC (Adj.), Mumbdi wherein it was held that fitting of equipments to ship to make it sea -worthy as per the Merchant Shipping (Distress and Safety Radio Communication) Rules, 1995 amounted to 'repair' for the purpose of SI. No. 227 of Notification No. 23/98 -Cus. The same decision was also relied on by ld. Counsel in support of his plea of limitation. The relevant Bills of Entry were filed during the period 14.1.1999 to 10.2.1999. The show -casue notice demanding duty on the goods was issued as late as on 25.6.2001 alleging misdeclaration of goods and invoking the extended period of limitation under the proviso to Section 28(1) of the Customs Act. Counsel argued that, as M/s. CSCPL did not misdeclare the equipments, which were actually used for repair of ocean -going vessels to make them sea -worthy, there was nor reason for invoking the extended period of limitation or for holding the goods liable for confiscation. He submitted that the entire demand of duty was time -barred. As the demand of duty was not sustainable, the penalties on the company and its Managing Director Shri K. Chidamabaram were also unsustainable. Ld. Advocate for M/s. ESL adopted the arguments of Shri R. Raghavan and submitted that, as the subject goods were not misdeclared and were not liable for confiscation, the finding that M/s. ESL abetted misdeclaration was unfounded and no penalty was impossible on them under Section 112 of the Customs Act. Ld. SDR reiterated the findings of the adjudicating authority.

(3.) AFTER giving careful consideration to the submissions, we find that the short question arising in this case is whether the subject equipments, which were declared as "ship spares" for repairs of oceangoing vessels, are covered by the description of goods under SI. No. 227 of the table annexed to Notification No. 23/98 -Cus. This entry reads as under: