2016 (11) TMI 302 - AT - Customs

Benefit of N/N. 21/2002-Cus dated 01.03.2002 - import of Marine Gas Oil - sub-sea equipment supply under NELP project - fuel used for running such vessels is exempt under S. No. 217 ibid - whether MGO is different from HSD (High Speed diesel oil) and is MGO exigible to benefit of N/N. 21/2002-Cus dated 01.03.2002? - Held that - The issue stands squarely covered by the judgments in the case of Transocean Discoverer 534 LLC Vs CCE 2015 (7) TMI 816 - CESTAT BANGALORE where it was held that There was a specific query from the Custom House asking the Chemical Examiner to state specifically whether the product is MGO or not. Instead of specifically stating whether the product is MGO or not, the Chemical Examiner has chosen to show us that the product is LDO. In the absence of a specific report from the Chemical Examiner that the product is not MGO which was what required by the Custom House, it cannot be said that the Chemical Examiner s report supports the case of the Custom House. There is no evidence to show that the product is not MGO. The Chemical Examiner s report also as observed by us does not support the case of the appellant. At this juncture, the learned AR submitted that the appellants have not challenged the test report at all. In fact even though the tests were conducted much earlier the results of the samples were communicated to the appellants only in 2012, the learned counsel drew our attention to a letter written by the appellants to the Customs saying that the sample may be referred to CRCL for re-examination. Further no action was taken on this letter probably because by the time the letter was written a number of years have already passed. Since it is not the case of the Revenue that the product imported by the appellant does not fulfill the parameters for MGO as per the Indian Standards, we are not in a position to uphold the impugned order taking a stand that what is imported is LDO and not MGO and therefore the benefit of exemption is not available. Exemption available - appeal allowed - decided in favor of appellant.

Summary

Issues:
Classification of fuel for vessels under customs exemption notification.

Analysis:
The case involved the classification of fuel used for running vessels under a customs exemption notification. The Appellant, a sub-contractor for oil exploration, imported vessels for operations related to petroleum exploration under the New Exploration Licensing Policy. The dispute arose regarding the exemption of Marine Gas Oil (MGO) under Notification No. 21/2002-Cus. The Appellant claimed exemption for MGO used as fuel for the vessels, while the officers contended that Additional Duty of Customs on High Speed Diesel Oil (HSD) was applicable, not exempted under the said notification. The dispute centered around whether MGO was distinct from HSD oil, with conflicting views on the classification of the imported fuel.

The Commissioner (Appeals) relied on the Chemical Examiner's report, which classified the fuel as Light Diesel Oil (LDO) based on specific characteristics. The Essentiality Certificate issued by the Directorate General of Hydrocarbons was for MGO/FO, not for LDO, leading to the denial of exemption for LDO. The Commissioner emphasized strict compliance with the conditions of the notification for availing exemptions, citing relevant legal precedents.

The Appellate Tribunal referred to a similar case judgment where the Chemical Examiner's report played a crucial role in determining the eligibility for exemption. The Chemical Examiner's report in the present case identified the fuel as LDO, not MGO, based on specific characteristics such as flash point, viscosity, density, and sulfur content. The Appellant argued that the fuel met the specifications for MGO as per ISO standards, highlighting discrepancies between the Chemical Examiner's report and industry standards for MGO and LDO.

The Tribunal acknowledged the arguments presented by the Appellant regarding the fuel's compliance with MGO specifications but noted the absence of a specific report confirming the product as MGO. The Tribunal highlighted the importance of clear classification by the Chemical Examiner, emphasizing that the report did not conclusively support either party's claim. The Tribunal found the Commissioner's decision unsustainable based on the lack of definitive evidence supporting the classification of the imported fuel as LDO, thereby setting aside the impugned order.

In conclusion, the Tribunal allowed the appeal, granting consequential reliefs to the Appellant. The decision emphasized the need for clear classification of imported goods, especially when determining eligibility for customs exemptions under specific notifications. The case underscored the significance of technical assessments and compliance with prescribed standards in resolving classification disputes under customs regulations.