2008 (4) TMI 303 - AT - Customs

Ship breaking - Whether the fuel and oil stored in the engine room as well as outside the engine room are to be assessed along with the ship falling under heading 89.08 or the same have to be classified under heading 27.10 in several subsequent decisions Tribunal has held that fuel and oil, apart from the quantity which is contained in engine and machinery, are required to be assessed separately under their respective headings and not under heading 89.08 appeals filed by the revenue are allowed

Summary

Issues: Classification of fuel and oil stored in a ship under specific headings.

The judgment by the Appellate Tribunal CESTAT Ahmedabad involved the classification of fuel and oil stored in a ship under specific headings. The main issue revolved around whether the fuel and oil stored in the engine room and outside the engine room should be assessed along with the ship under heading 89.08 or classified separately under heading 27.10. Initially, the Assistant Commissioner classified the fuel and oil contained in the vessel's machinery and engines under heading 89.08, considering it an integral part of the vessel. However, the Commissioner (Appeals) reversed this decision based on the Ghaziabad Ship Breakers case, leading to the appeal before the Tribunal.

Upon hearing both sides, the Tribunal noted that the Commissioner (Appeals) had followed the Ghaziabad Ship Breakers decision, while a reference application filed by the Revenue was pending in the High Court without a stay of operation. However, another High Court judgment in the Priya Blue Industries case held that the Tribunal's decision in that case was correct, indicating a divergence in judicial opinions. The Tribunal reiterated that the classification of fuel and oil depended on their location, emphasizing that only the fuel and oil contained in the vessel's machinery and engines could be classified under heading 89.08. Since the fuel and lubricating oil in question were not in the engine room but confined in a tank, they were to be classified separately under the appropriate heading.

The Tribunal and Commissioner (Appeals) rejected the claim of the assessee, as they concurred that the fuel was not in the engine or machinery, leading to the dismissal of the appeal at the admission stage. The Tribunal further referenced other decisions emphasizing the separate assessment of fuel and oil not contained in the engine and machinery. Consequently, the Tribunal set aside the impugned orders and allowed the appeals filed by the revenue, aligning with the principle of separate classification for fuel and oil based on their location and containment within a ship.