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Issues:
- Classification of fuel and oil in vessels - Refund claims rejection based on classification - Interpretation of CBEC guidelines - Ship breaking activity and importation of goods - Assessment based on CBEC guidelines Classification of Fuel and Oil in Vessels: The case involved appeals against orders confirming the rejection of refund claims by the Assistant Commissioner of Central Excise, Bhavnagar. The appellants, engaged in ship breaking activity, imported old vessels for breaking up and filed refund claims which were rejected. The issue revolved around the classification of fuel and oil in vessels. The original authority classified fuel and oil not contained in the machinery and engines under separate headings, holding them dutiable and rejecting the refund claims. The appellants argued that all fuel and oil, including those in machinery and engines, should be classified under Chapter Heading 89.08. However, the authorities disagreed, leading to the rejection of the refund claims. Refund Claims Rejection Based on Classification: The adjudicating authority rejected the refund claims amounting to Rs. 5,51,180/- and Rs. 2,44,863/- on the grounds that the bunkers/oils shown as contained in the vessel's machinery & engines were reserved for future consumption/requirement and thus not integral parts of the vessel. The survey report did not support the appellants' claim that the bunkers/oils were part of the vessel's machinery & engine. The rejection was based on the interpretation that such items should be classified separately under their own tariff heading, as per Board's Circular No. 37/96. Interpretation of CBEC Guidelines: The appellants contended that not only fuel and oil contained in the vessel's machinery and engines but also remaining fuel, oil, and other ship stores should be classified under Chapter Heading 89.08. However, the authorities classified these items separately, holding them dutiable and rejecting the refund claims. The appellants argued that tanks storing fuel oil were machines, meant for ship consumption, and not for importation. They also highlighted that after beaching for ship breaking, no fuel oil or food stuff remained for consumption, emphasizing their ship breaking activity. Ship Breaking Activity and Importation of Goods: The appellants, engaged in ship breaking activity, emphasized that they were not importing fuel oil or food stuff but dealing with dismantling ships. They argued against segregating fuel and oil and other ship stores for separate classification, as the ship's price already included all items. The master of the ship had not submitted the required import manifest or report under the Customs Act, 1962, further supporting their stance against separate classification and higher duty charges. Assessment Based on CBEC Guidelines: The original authority based the assessment on CBEC guidelines derived from the World Customs Organization's opinion. The guidelines prescribed reasonable norms for determining what constitutes part and parcel of a ship for assessment purposes. The Commissioner (Appeals) upheld the original authority's findings, emphasizing that the term "ship" cannot encompass everything within the vessel. The guidelines provided clear distinctions on what should be treated as part of the ship for assessment and what should be separately classified, leading to the dismissal of the appeals.
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