Tug brought for breaking must be classified as whole unit under heading 8908.00.00, separate bunker duty invalid

CESTAT Ahmedabad rejected appellant's appeal against final assessment order concerning tug classification and duty assessment under Customs Act, 1962 and Customs Tariff Act, 1975. The tribunal held that a tug brought to Alang port for breaking must be classified under tariff heading 8908.00.00 as a whole unit including bunkers, rather than separately classifying tug and bunkers under different headings. The authority cannot demand separate duty on bunkers when the entire vessel is presented for breaking assessment. Following precedent in Collector of Customs v. Shipping Corporation of India Ltd., the tribunal found the coastal cargo interpretation favored the assessee, making the impugned order unsustainable and allowing the appeal.

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Issues Involved:

1. Misinterpretation of Coastal Cargo under Chapter-XII of the Customs Act, 1962.
2. Classification and duty assessment of tug and bunkers under the Customs Tariff Act, 1975.

Summary:

Issue 1: Misinterpretation of Coastal Cargo under Chapter-XII of the Customs Act, 1962

The appellant argued that the Adjudicating Authority misconstrued the definition of coastal cargo under Chapter-XII of the Customs Act, 1962. The appellant contended that the tug Hurricane-III was imported solely for breaking purposes and not for commercial business. They emphasized that the vessel and its contents, including bunkers and provisions, should be classified under Chapter sub-heading 8908.00 of the Customs Tariff Act, 1975, which pertains to "Vessels and other floating structures for breaking up." The appellant further argued that the import general manifest was correctly filed for home consumption, and the lower authorities wrongly interpreted the terms "coastal duty," "coastal goods," and "coastal cargo."

Issue 2: Classification and Duty Assessment of Tug and Bunkers under the Customs Tariff Act, 1975

The appellant maintained that since the vessel was imported for breaking, the bunkers should not be classified separately or subjected to coastal duty. They relied on several precedents, including the cases of Collector of Customs, Ahmedabad v/s Shipping Corporation of India Ltd. and Jain Marine Services v/s CC, Jamnagar, to support their argument that the entire tug, including the bunkers, should be assessed as a single entity for breaking purposes. The Tribunal found that the tug was correctly classified under 8908.00.00 of the Customs Tariff Act and that the bunkers should not be assessed separately. The Tribunal referred to the case of Shipping Corporation of India Limited, where it was held that the voyage and the nature of goods carried determine whether a vessel is considered a foreign going vessel or engaged in coastal trade.

Conclusion:

Following the established precedents and detailed analysis, the Tribunal concluded that the impugned order was not sustainable. The appeal was allowed, and the order was set aside. The Tribunal pronounced the judgment in the open court on 21/06/2024.

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