2017 (10) TMI 1200 - AT - Customs

Classification of goods - import of old and used vessels for breaking purpose - restricted item - classifiable under CTH 89 08 or otherwise? - whether the Marine Gas Oil imported inside the fuel tanks of vessels which are imported for breaking is subject to ITC restrictions? - Held that - the issue is no longer res integra and is squarely covered by the decision of this Tribunal in the case of A.G. Enterprise 2014 (8) TMI 44 - CESTAT AHMEDABAD , where it was held that 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 - appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
Classification of imported Marine Gas Oil (HSD) in vessels for breaking purpose under import/export policy.

Detailed Analysis:

Issue 1: Classification of Imported Marine Gas Oil (HSD)
The appeals were filed against Orders-in-Appeal passed by the Ld. Commissioner of Customs (Appeals), Jamnagar, regarding the classification of Marine Gas Oil (HSD) imported with old and used vessels for breaking purposes. The Revenue argued that the MGO should be classified under Chapter 27 of the Customs Tariff Act as a restricted item, while the appellants contended it should be considered part of the vessels and classified under TH 89.08 of the import policy.

Analysis:
The Tribunal found that the issue of whether the Marine Gas Oil imported inside the fuel tanks of vessels for breaking is subject to ITC restrictions had already been settled in the case of A.G. Enterprise. The Tribunal observed that the surplus fuel stored in the fuel tanks of vessels imported for breaking should be considered an integrated part of the vessel's machinery and classified under 89.08. The Tribunal referred to the Foreign Trade Policy provisions and a clarification issued by the Joint DGFT, stating that such fuel should be classified along with the main vessel under 89.08, making it free from restrictions. The Tribunal also highlighted that the clarification issued by DGFT is binding on customs regarding ITC restrictions but not for classification under the Customs Tariff Act.

Conclusion:
Based on the precedent set by the A.G. Enterprise case and subsequent Supreme Court affirmation, the Tribunal set aside the impugned orders and allowed the appeals filed by the appellants. The Tribunal emphasized that the MGO/HSD contained in vessels brought in for breaking up cannot be held liable for confiscation under the Customs Act, and no penalties are imposable. The decision was in line with the classification under Heading 89.08 of the Import Policy as an integral part of the vessel, as clarified by the DGFT.

Final Decision:
The Tribunal allowed the appeals filed by the appellants, following the precedent set by the A.G. Enterprise case and the clarification issued by the DGFT regarding the classification of Marine Gas Oil in vessels imported for breaking purposes under the import/export policy.