2015 (11) TMI 1398 - AT - Customs

Classification of the ships/vessel, brought in for breaking up along with surplus fuel - Confiscation of goods - Imposition of redemption fine and penalty - 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), dated 26-6-2013. 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. It is also relevant to mention that no ITC action is taken by the Revenue when an ocean-going vessel is converted into coastal-run vessel and only duties are paid on the fuel used during the coastal run. - Decided in favour of assessee.

Summary

Issues: Classification of imported goods under import policy and customs tariff, confiscation, redemption fine, penalty for contravention of import policy.

Classification of Goods under Import Policy and Customs Tariff:
The appellants filed appeals against confiscation, redemption fine, and penalty for contravening the import policy by failing to produce authorization for the import of Marime Gas Oil (MGO) considered as High-Speed Diesel (HSD). The Revenue argued that HSD falls under chapter 27 of the Customs Tariff as a restricted item, while the appellants contended it should be classified under chapter 89.08 as part of the vessels. The DGFT's clarification supported the appellants' stance, considering the surplus fuel in vessels for breaking as an integrated part of the vessel's machinery under chapter 89.08. The Tribunal's decision in AG Enterprises case favored the importers, stating that such goods cannot be confiscated or penalized under the Customs Act due to their classification under chapter 89.08 of the Import Policy.

Confiscation and Redemption Fine:
The appellants argued that the goods were not available for confiscation, citing the Tribunal's decision in Ram Khazana Electronic case. The Revenue mentioned that the goods were released on provisional assessment. The Tribunal found that the issue was settled by the AG Enterprises case, ruling in favor of the importer and negating the need to discuss other issues raised by the counsel. The clarification issued by the Joint DGFT was deemed binding on customs regarding ITC restrictions under the Foreign Trade Policy, although not binding on customs for classification under the Customs Tariff Act.

Penalty for Contravention of Import Policy:
The Tribunal emphasized that the classification of ships/vessels brought in for breaking up, along with surplus fuel, should be under Heading 89.08 of the Import Policy, following the DGFT's opinion. As imports under ITC 89.08 are free without restrictions, the MGO/HSD in vessels for breaking up cannot be subject to confiscation or penalties under the Customs Act. The judgment highlighted that no penalties were imposable on the appellants under Section 112(a) of the Customs Act, given the classification under chapter 89.08.

In conclusion, the Tribunal set aside the impugned order and allowed the appeals filed by the appellants based on the precedent set by the AG Enterprises case. The applications for early hearing were dismissed as infructuous.