Commissioner vs Jayesh C. Mistry

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Akil Abdul Hamid Kureshi, J.

These appeals arise out of common background. We would notice facts as arising in Tax Appeal No. 1126/2014. The department has filed this appeal challenging the judgement of the Customs Excise & Service Tax Appellate Tribunal ("the Tribunal" for short), dated 3-3-2014 raising the following questions for our consideration :

"(A) Whether the Tribunal committed error in interpreting Rule 26 of Central Excise Rule, 2002 while setting aside the personal penalties imposed on all individuals including respondent?

(B) Whether tribunal committed mistake by not remanding even issue of imposing penalties while remanding back the issue about limitation against main assessee?"

As can be seen the sole issue is with respect to the personal penalties imposed by the adjudicating authority but deleted by the Government. The issue pertains to correct heading under which a structure in the nature of a vessel constructed by the assessee M/s. WBB. According to the department, the construction would qualify as yacht. This was opposed by the manufacturer on the ground that the same cannot be termed as a yacht or vessel for pleasure as it lacked so many basic requirements like electrical wirings and other navigational equipments. The Tribunal while upholding the stand of the department on the correct classification of the goods, nevertheless, held that there would be no reason for imposing personal penalties.

In the order, the Tribunal has discussed the taxability of goods at considerable length and come to the following conclusion :

"It can be noticed from the various documents on record that M/s. Raymond Limited had placed an order for design, structure, supply and delivery of wooden hull motor yacht on M/s. WBB on 12-12-2000. On perusal of the records, it transpires that a quotation given by M/s. WBB to an enquiry from M/s. Raymond Ltd. for wooden hull motor yacht, we find that the order placed by M/s. Raymond Ltd. was in respect of a "wooden hull motor yacht". Even if it is contended by M/s. WBB that they could not construct a complete yacht but what was constructed in WBB's yard was a hull with super structure, it had an essential character of yacht. This factual position is disputed by ld. Counsel for M/s. WBB by reading Chapter note and stated that essential character of a vessel of a particular kind to be read as these should be presence of an Independent/Complete yacht in place. We do not agree with the proposition made by the ld. Counsel, as in our considered view, hull which has come into existence in WBB's premises, by any stretch of imagination could not have been used for any other floating structure other than a yacht. The essentiality of constructing a yacht has been laid down by the hull and super structure built by M/s. WBB. The argument of the ld. counsel that the said wooden structure cleared by them cannot be termed as a yacht or vessel for pleasure as it lacked so many minimum requirements like electrical wirings and other navigational equipments, fail, as in our view the words "essential character of vessel of a particular kind" needs to be read as to the whether the hull and super structure thereon satisfies the basic requirement of a yacht or any other floating vessel or a structure. In our view the findings recorded by the adjudicating authority that the wooden hull cleared by M/s. WBB has attained character of a yacht is correct and the classification as done by adjudicating authority under chapter heading 89.03 does not require any interference.

10.2 On merits, we find that the appellants arguments needs to be rejected and the classification as done by the adjudicating authority has to uphold."

However, with respect to penalty, the Tribunal accepted the stand of the manufacturer that it had bona fidely believed that hulk cleared by the manufacturer would be classified under the Chapter Heading 89.06 and not 89.03. It was not a case of deliberate misdeclaration. In the conclusion, the Tribunal on the question of personal penalty held and observed as under :

"18. Since the entire issue in all these appeals is of interpretation of the entries in Chapter 89, we find that there was no reason for visiting individuals (who are appellants herein) with penalties. Accordingly, penalties imposed on all individuals who have filed appeals before the Tribunal, are set aside and their appeals are allowed."

In our opinion, the Tribunal committed no error. The issues involved interpretation of the entries. The Tribunal when therefore, ordered deletion of personal penalty in our opinion, no question of law can be stated to have been arisen. Tax Appeals are dismissed.