Valuation of bunker oil in scrapped vessels upheld as part of ship value; revenue appeals dismissed

Valuation addressed whether bunker oil in engine room or external bunker tanks of vessels sent for breaking up should be assessed separately or as part of the ship. The tribunal treated the oil as part of the ship for valuation purposes, applying the principle that components integral or accessory to the principal goods form a single unit of assessment; accordingly, separate assessment of the bunker oil was rejected and the oils value is included in the vessels scrap valuation, resulting in dismissal of the revenue appeals.

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Issues:
The issue involves the assessment of oil in the bunker tanks of vessels sent for scrapping, whether to be assessed separately or as part of the vessels to be scrapped.

Judgment Details:
The Supreme Court heard appeals by the Revenue against two orders of the Customs Excise & Service Tax Appellate Tribunal (CESTAT) dated 16.02.2022 and 01.12.2022. The CESTAT had ruled that the oil in the bunker tanks is to be assessed as part of the ship. However, in a previous appeal, the CESTAT had ruled differently, stating that both the articles should be separately assessed.

After considering both orders and submissions, the Court concluded that the later view expressed in the orders dated 16.02.2022 and 01.12.2022 is correct. The Court dismissed the Revenue's appeals. Any pending interlocutory applications were disposed of accordingly.

In a separate judgment related to Civil Appeal Nos. 5318-5342/2009, the civil appeals were allowed based on the reasons stated in the main order. Any pending interlocutory applications in this matter were also disposed of.

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