2012 (11) TMI 532 - HC - Customs

Treating bunkers to be as a part of the vessel s machinery to attract Entry No.89.08 of the Schedule to the Customs Tariff Act, 1985 - Held that - Considering the reliance placed by assessee on book titled Ship Design and Construction for demonstrating that fuel and oil contained in the engine department tanks is always associated and connected with the machinery and engine of the ship which forms an integral part of the vessel and also as per the definition of LDT of ship, oil stored in other tanks on the ship are not included in the LDT, however, oil in engine room tanks is included in the LDT and it, therefore, forms part of the vessel and is classifiable along with the ship under Heading No.89.08. As the fuel and oil contained in the engine tanks is considered to be fuel and oil contained in the vessel s machinery and engines, the same would directly fall within the ambit of sub- para (b) of paragraph 2 of the above referred circular No . 37/96-Cus dated 03.07.1996 and once the fuel and oil contained in the bunkers, that is, engine room tanks, fall within the ambit of sub- para (b), as a natural corollary the same would be classifiable along with the vessel under Heading No.89.08 - in favour of the assessee.

Summary

Issues: Classification of bunkers containing oil under Customs Tariff Act

Issue 1: Classification of bunkers containing oil
The case involved a dispute regarding the classification of bunkers containing oil under the Customs Tariff Act, specifically whether the fuel and oil in the engine room tank of the vessel should be classified with the ships under heading 89.08 or under their own headings.

Analysis:
The Tribunal referred to Circular No. 37/96-Cus, which stated that fuel and oil contained in the vessel's machinery and engines could be classified under Heading No. 89.08 as an integral part of the vessel. The circular also specified that remaining fuel and oil should be classified separately in their respective headings. The Tribunal found that the fuel and oil in the engine room tank constituted an integral part of the vessel and should be classified with the ships under Heading 89.08. This decision was based on the evidence presented, including references to a book on ship design and construction, which highlighted the association of fuel and oil in engine room tanks with the machinery and engine of the ship.

Conclusion:
The Tribunal's decision was upheld by the High Court, stating that there was no legal infirmity in the classification of bunkers containing oil as part of the vessel's machinery under Heading No. 89.08 of the Customs Tariff Act. The judgment favored the assessee and ruled against the revenue, disposing of the reference accordingly.