2014 (8) TMI 44 - AT - Customs

Tribunal rules on Marine Gas Oil classification, favoring appellants. Surplus fuel integral to vessel, not subject to Customs Act.

M/s AG Enterprise and others Versus CC (Preventive) Jamnagar

The Tribunal ruled in favor of the appellants in a case concerning the classification of Marine Gas Oil (HSD) found in ships brought in for breaking. It ... Classification of goods - classification of the ships/vessel, brought in for breaking up along with surplus fuel - clarification by Joint DGFT versus clarification by CBEC - Held that:- An opinion/clarification issued by Joint DGFT has to be considered as a clarification issued by DGFT & will be binding on the customs so far as ITC restrictions are concerned under Foreign Trade Policy. However, the same clarification issued by DGFT may not be binding on the Customs for the classification of the same goods under the Customs Tariff Act which is the sole domain of the Customs Authorities. However, so far as classification of the ships/vessel, brought in for breaking up along with surplus fuel, will have to be considered classifiable under Heading 89.08 of the Import policy as an integral part of the vessel/ship, as per opinion given by DGFT under F.No.IPC/4/5(684)/97/82/PC-2(A), dt.26.06.2013. As the imports under ITC(HS) 89.08 are free without any restrictions, therefore, such MGO/HSD contained in the vessels brought in for breaking up, cannot be held as liable for confiscation under Section 111(d) of the Customs Act, 1962 and no penalties upon the appellants are imposable in the present appeals under Section 112(a) of the Customs Act, 1962 - Decided in favour of assessee. Issues:Classification of HSD/LDO under the EXIM Policy for ships brought in for breaking.Analysis:The appeals were filed by the appellant against the orders-in-appeal passed by the Commissioner (Appeals) Jamnagar, all related to the classification of Marine Gas Oil (HSD) in ships brought for breaking. The dispute centered around whether the MGO (HSD) found in the vessels should be classified under the Import policy as a restricted item or as an integral part of the vessel under a different classification. The appellant argued that the MGO (HSD) was received along with the vessel as ship stores without any extra payment, while the Revenue contended that it should be classified as a canalysed item under the Import policy. Both lower authorities held in favor of the Revenue, leading to the appeals.The appellant's advocate argued that surplus fuel stored in the vessels forms an integral part of the vessel's machinery and should be classified under a different category as per the DGFT's clarification. The advocate relied on various case laws to support the argument that interpretations made by the DGFT on import policy are binding on customs authorities. On the other hand, the respondent's representative defended the lower authorities' decisions based on CBEC clarifications, stating that the fuel in the vessels should not be allowed free as per import policy restrictions.The Tribunal analyzed the issue in detail, considering the relevant provisions of the Foreign Trade Policy and the DGFT's opinion. It highlighted that any doubt regarding classification should be referred to the DGFT, whose decision is final and binding as per the policy. The Tribunal referenced a case law to emphasize that clarifications on import policy issued by the DGFT are binding on customs authorities concerning the Import Trade Control (ITC) Policy.Ultimately, the Tribunal concluded that the surplus fuel stored in the vessels brought for breaking up should be considered an integral part of the vessel and classified under a specific category as per the DGFT's opinion. Since imports under this category were free without restrictions, the MGO/HSD in question could not be confiscated or penalized under the Customs Act. The Tribunal allowed the appeals filed by the appellants, providing consequential relief as necessary.