2011 (6) TMI 574 - AT - Customs

Tribunal Upholds 4% SAD Levy on Imported Vessels for Demolition, Denies Exemptions

The Tribunal upheld the decision that the levy of 4% Special Additional Duty (SAD) applied to vessels imported for demolition, rejecting the appellant's ... Benefit of Exemption Notification from SAD - appellants imported an old ship for breaking - Bill of Entry was assessed without extending the benefit of Notification No. 22/99-Cus., dated 28-2-1999 under which Special Additional Duty (SAD) under Section 3A of Customs Excise Tariff Act, 1985 was exempted subject to declaration by the importer that the imported goods were for sale “as such” and such sale was not from the area where no tax was chargeable to sale or purchase of the goods – Held that:- in the case of Ghaziabad Ship Breakers (2002 - TMI - 51598 - CEGAT, COURT NO. II, NEW DELHI – Customs). drinks and foodstuff not to be treated as ship stores, covered by Section 87 of Customs Act, 1962 and have to be classified in their own appropriate headings. Similarly, fuel and oil contained in the engine room tanks have to be classified in their respective headings, in terms of Board’s Circular No. 37/96-Cus., dated 3-7-1996. appeal is, accordingly, rejected Issues Involved:1. Levy of 4% Special Additional Duty (SAD) on vessels imported for demolition.2. Levy of duty on fuel and oil declared in the Engine Room tanks.3. Exemption of duty on foodstuff (consumable goods) on board the vessel imported for demolition under Section 87 of the Customs Act, 1962.4. Abatement in the value of the vessel corresponding to the value of prohibited goods like cigarettes and liquor surrendered to the Customs authority.Issue-wise Detailed Analysis:1. Levy of 4% Special Additional Duty (SAD):The primary issue was whether the new levy of 4% SAD in terms of Notification No. 56/98-Cus., dated 1-8-1998, as amended by Notification No. 28/99-Cus., dated 28-2-1999, should be applied to vessels imported for demolition. The appellant argued that the ship imported was old and unserviceable, thus considered re-rollable scrap, and sold 'as such,' making the SAD exemption applicable. However, the Tribunal referred to its decision in the case of Ghaziabad Ship Breakers, which held that ships imported for breaking are not sold 'as such' but as materials obtained after breaking, thus not qualifying for the exemption. The Tribunal ruled that the exemption from SAD was not available to the appellant.2. Levy of Duty on Fuel and Oil:The appellant contended that the fuel and oil in the Engine Room tanks should not be classified separately but as part of the vessel. The Tribunal referred to Board's Circular No. 37/96-Cus., dated 3-7-1996, which differentiates between fuel and oil contained in the vessel's machinery and those in tanks. The latter must be classified under Chapter Heading 2710. The Tribunal also cited previous decisions, including those of the Mumbai Bench, which supported this classification. Thus, the duty on fuel and oil in the tanks was correctly levied separately.3. Exemption of Duty on Foodstuff:The appellant claimed exemption under Section 87 of the Customs Act, 1962, for foodstuff on board the vessel. The Tribunal noted that Section 87 exempts stores consumed on a 'foreign-going vessel.' Since the vessel imported for demolition does not qualify as a 'foreign-going vessel' under Section 2(21) of the Customs Act, the exemption was not applicable. The Tribunal upheld the duty on foodstuff.4. Abatement in Value for Prohibited Goods:The appellant sought abatement in the vessel's value corresponding to the value of prohibited goods like cigarettes and liquor surrendered to Customs. The Tribunal observed that these items were excluded from the sale as per the Memorandum of Agreement and were surrendered before the vessel was handed over to the importer. Since the importer did not pay for these items, abatement in value was not allowable. The Tribunal upheld the decision that no abatement should be granted.Conclusion:The Tribunal found no justifiable reason to interfere with the impugned order passed by the authorities below. The appeal was rejected, affirming the decisions on all issues, including the levy of 4% SAD, duty on fuel and oil, non-exemption of duty on foodstuff, and denial of abatement in value for prohibited goods. The judgment emphasized adherence to established legal interpretations and previous rulings, ensuring consistency in the application of customs law.