CESTAT rules tug maintaining foreign status while towing dead vessel, duty assessment case

The Appellate Tribunal CESTAT, AHMEDABAD, ruled in favor of the appellants in a case concerning the assessment of duty on fuel and provisions consumed by a tug while towing a dead vessel. The Tribunal held that the tug maintained its status as a foreign going vessel despite towing the vessel from one Indian port to another, as the vessel remained uncleared for home consumption until reaching its final destination. Consequently, the Tribunal allowed the appeals, providing relief to the appellants and disposing of the Revenue's cross objections.

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Issues involved: Assessment of duty on fuel and provisions consumed by a tug while towing a dead vessel, classification of the tug as a foreign going vessel or coastal vessel.

In the case before the Appellate Tribunal CESTAT, AHMEDABAD, a bill of entry was filed by the appellants for assessment of fuel and provisions consumed by a tug named "TOPAZ" while towing a dead vessel "SAGAR PRABHAT" from Visakhapatnam to Alang. The Superintendent of Customs, Bhavnagar, did not agree with the appellants' claim that the tug should be treated as a "foreign going vessel" and levied duty on the stores. The Commissioner (Appeals) upheld the assessment, leading the appellants to appeal to the Tribunal.

The learned counsel for the appellants argued that the tug was a foreign going vessel as it was bought from Singapore to tow the vessel from Visakhapatnam to Alang, meeting the definition under Section 2(21) of the Customs Act, 1962. He emphasized that the vessel's stop at Visakhapatnam did not alter its foreign going status, and the carriage of goods between Indian and foreign ports did not affect this classification. Additionally, it was highlighted that the tug was never used for coastal cargo transportation, challenging the imposition of customs duty on stores.

On the other hand, the Learned DR contended that the vessel towed by the tug was a dead vessel, and the journey from Visakhapatnam to Alang was considered a coastal run due to this circumstance.

After considering the arguments, the Tribunal found merit in the appellants' position. It was noted that the vessel remained uncleared for home consumption until reaching Alang, indicating that it had not been converted into a coastal run during the towing process. Therefore, the Tribunal concluded that towing a dead imported vessel, not yet cleared for home consumption, did not alter the tug's classification from a foreign going vessel to a coastal vessel. Consequently, the appeals were allowed, providing consequential relief to the appellants, and the Revenue's cross objections were also disposed of.

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