2014 (10) TMI 227 - HC - Customs

Whether the bunkers containing oil were to be treated as part of the vessel s machinery so as to attract Entry No. 89.08 of the Schedule to the Customs Tariff Act, 1975 - Held that - Tribunal after appreciation of the evidence on record has rightly arrived at the conclusion that the fuel and oil contained in the engine room tanks form part of the vessel s machinery and engine and as such are classifiable along with the vessel under Heading No. 89.08. It was further pointed out that the Tribunal, while allowing the appeal, has placed reliance on its earlier decision in the case of Priya Holding (P) Ltd. v. Commissioner of Customs, Ahmedabad now reported in 2002 (12) TMI 431 - CEGAT, NEW DELHI , against which the Revenue had made a reference application before this Court being CECGR No. 14 of 2004 2012 (11) TMI 532 - Gujarat High Court whereby this Court, by a detailed order has answered the question in the affirmative - Decided against Revenue.

Summary

Issues involved:
Interpretation of Customs Act, 1962 - Classification of bunkers containing oil as part of vessel's machinery under Entry No. 89.08 of Customs Tariff Act, 1975.

Analysis:

Issue 1:
The applicant sought a reference under Section 130A of the Customs Act, 1962, regarding the classification of bunkers containing oil as part of a vessel's machinery under Entry No. 89.08 of the Customs Tariff Act, 1975.

Issue 1 Analysis:
The respondent imported a ship for breaking and was issued a show-cause notice regarding the duty on movable gears, stores, and bunkers. The Assistant Commissioner confirmed duty on remaining fuel, oil, and bunkers. The Commissioner (Appeals) upheld this decision, stating that bunkers were not part of the vessel's machinery. However, the Tribunal allowed the appeal, citing previous decisions where engine room tanks were considered part of the vessel's machinery. The Tribunal's decision was challenged, arguing that engine room tanks should not be classified under Heading 89.08. The respondent contended that fuel and oil in engine room tanks were integral to the vessel and should be classified accordingly.

Issue 2:
The interpretation of the circular regarding the classification of fuel and oil contained in the vessel's machinery and engine under Heading No. 89.08.

Issue 2 Analysis:
The Revenue argued that the circular specified fuel and oil in the vessel's engines only, not in engine room tanks. They contended that engine room tanks should be classified separately. In contrast, the respondent maintained that fuel and oil in engine room tanks were part of the vessel's machinery and should be classified under Heading No. 89.08. The Tribunal's decision was supported by previous judgments and the reference application made by the Revenue in a related case was answered in favor of the assessee.

Conclusion:
The Tribunal's decision, based on previous judgments, was upheld, classifying fuel and oil in engine room tanks as part of the vessel's machinery under Heading No. 89.08. The reference was answered in favor of the assessee, concluding the matter in line with the interpretation of the Customs Act and relevant circulars.