A.G. Enterprises Versus COMMISSIONER OF CUS. (PREVENTIVE), JAMNAGAR>2014(07)LCX0041

2014(07)LCX0041

IN THE CESTAT, WEST ZONAL BENCH, AHMEDABAD [COURT NO. I]

S/Shri M.V. Ravindran, Member (J) and H.K. Thakur, Member (T)

A.G. Enterprises

Versus

COMMISSIONER OF CUS. (PREVENTIVE), JAMNAGAR

Final Order Nos. A/11210-11318/2014-WZB/AHD, dated 8-7-2014 in Appeal Nos. C/13527, 13603-13604, 13643-13644, 13719-13721, 13739-13741, 13754, 13775-13776, 13778, 13831-13832, 13900,13935, 13961-13962, 13982, 13990, 14008-14009, 14011, 14037-14038,14045, 14083-14085, 14087-14091, 14102-14107,14113-14114, 14120, 14146-14147, 14162, 14171, 14187-14188, 14191/2013,C/10037, 10053-10055, 10075-10076, 10078,10091-10092,10124-10125 10135-10136, 10138-10139,10195-10197, 10281, 10285,10294-10295, 10319, 10358,10432, 10448, 10482-10483, 10505, 10543-10545, 10584, 10670, 10672-10674,10704, 10979, 11020, 11026-11027, 11086, 11142,11144, 11208, 11320-11321,11356-11357, 11406, 11429, 11576, 11662, 11766, & 11834/2014

Cases Quoted -

Cine Land v. Commissioner - 1999(06)LCX0154 Eq 1999 (114) ELT 0653 (Tribunal) - Relied on [Paras 3, 4.2]
Priya I folding Pvt Ltd. v. Commissioner - 2012(07)LCX0191 Eq 2013 (288) ELT 0347 (Guj.) - Referred [Para 3]
Richardson I lindustan Limited v. Union of India - 1988(06)LCX0049 Eq 1988 (037) ELT 0496 (Bom.) - Referred [Para 3]
Unimers India Ltd. v. Commissioner - 2009(06)LCX0307 Eq 2010 (250) ELT 0225 (Tribunal) - Referred [Para 3]

Departmental Clarification Quoted-

C.B.E. & C. F. No, 528/74/2012-GTOCTV), dated 26-1-2013 [Paras 2, 3,4]
DGFT F. No. IPC/4/5(684)/97/82/PC-2(A), dated 26-6-2013 [Paras 3, 4, 5]

Advocated By -

Shri J.C. Patel, Advocate, for the Appellant.
Shri K. Sivakumar, Addl. Commissioner AR, for the Respondent.

[Order per : H.K. Thakur, Member (T)]. -

All these appeals have been filed by the appellant with respect to the orders-in-appeal passed by the Com-missioner (Appeals) Jamnagar. As the issue involved in all these appeals is the same, therefore, these are being taken up together for disposal under this common order.

2. Brief facts leading to the present proceedings are that the appellants are the ship breakers and bought the old and used ship for breaking up. At the time of ship breaking, the ships/vessels contain Marine Gas Oil (HSD) in the tanks of the vessel in addition to the MGO (HSD) lying in the tank of the ship engine. As per the agreements, buyers of the ships also take over the oil bunkers, unused lubricants and unused stores and provisions at the port of delivery of the vessels without any extra payments. The commercial invoice showing the purchase of vessels meant for ship breaking does not disclose any extra price for the MGO (HSD) etc. so acquired by the appellants. Appellants paid the applicable duty on MGO (HSD) but according to Revenue, MGO (HSD) is a canalysed item as per ITC (HS) 2012, Schedule I of import policy and HSD is subject to import only through IOC subject to Para 2.11 of the Foreign Trade Policy and imports of such MGO/HSD is restricted. Both the lower authorities held that appellants have contravened the provisions of Para 2.11 of the Foreign Trade Policy making the MGO/HSD liable to confiscation under Section 111(d) of the Customs Act, 1962 read with CBEC clarification issued under F. No. 528/74/2012-GTO(TV), dated 26-1-2013.

3. Shri J.C. Patel (Advocate) appearing on behalf of the appellants argued that as per EXIM Policy Heading 2710 19 40 and 2710 19 30, LDO and HDO are canalysed items to be imported only through State Trading Agencies. That at the same time, vessels and other floating structures tor breaking up are classified under EXIM code 8908 00 00 of the same EXIM Policy import of which is free, it was his case that MGO (HSD) is not separately imported by the appellant but is received along with the vessel as ship stores, along with other ship stores and no extra price is paid for such MGO (HSD) acquired by the appellants. That DGFT vide clarification issued under F. No. IPC/4/5(684)/97/82/PC-2(A), dated 26-6-2013 in para 4 has clarified that surplus fuel stored in the fuel tanks (whether inside or outside the engine room) form an integral part of the vessel's machinery and is classifiable under EXIM code 89.08 of the EXIM Policy. That as per Para 2.3 of the Foreign Trade Policy, interpretation made by the DGFT is final and binding. Ld. Advocate relied upon Gujarat High Court's order in the case of Pmja Holding (P) Ltd. v. CC (P) [2012(07)LCX0191 Eq 2013 (288) ELT 0347 (Guj.)] wherein it is held that oil stored in the bunkers of the vessels is to be classified under 89.08 as an integral constituent of the vessel. He also relied upon the following case laws to emphasize that interpretations made by the DGFT on the import policy are binding on the customs authorities :-

(i) Cine Land v. CC, Chennai [1999(06)LCX0154 Eq 1999 (114) ELT 0653 (Tribunal)]

(ii) Unimers India Ltd. v. CC, Mangalore [2009(06)LCX0307 Eq 2010 (250) ELT 0225 (Tri.-
Bang.)]

(iii) Richardson Hindustan Limited v. UOI [1988(06)LCX0049 Eq 1988 (037) ELT 0496 (Bom.)]

3. Shri K. Sivakumar, (AR) appearing on behalf of the appellant argued that as per C.B.E. & C. clarification issued under F. No. 528/74/2012-GTO (TV), dated 26-1-2013, the fuel contained in the vessels brought for breaking up should not be allowed free as per the import policy restrictions. That the instructions issued by CBEC are binding on all the field formations. Ld. A.R. accordingly defended the orders passed by the lower authorities.

4. Heard both sides and perused the case records. The issue involved in all these appeals is as to what should be the classification of HSD/LDO, under the EXIM Policy, which is contained in the fuel tanks of the vessels brought for breaking. As per the CBEC Circular dated 26-1-2013 and the orders passed by Commissioner (Appeals) such fuel needs classification under 27101040 of the Import Policy and is a restricted item to be imported through State Trading Agencies. Appellants, on the other hand, argued that BSD is not separately imported by the appellants and was found contained in the vessel as fuel/ship stores at the time of purchase and no extra price is paid for such fuel. It is observed that DGFT under F. No. IPC/4/5(684)/97/82/PC-2(A), dated 26-6-2013 has opined that surplus fuel stored in the fuel tanks (whether inside or outside engine room) forms a part of the ship/vessels imported for breaking up and should be considered as integrated part of the vessel's machinery and is classifiable under 89.08.

4.1 It is further observed that Para 2.3 of Chapter 2 of the Foreign Trade Policy (2009 to 2014), contained in General Provisions Regarding Imports & Exports, is relevant and is reproduced below :-

"2.3 If any question or doubt arises in respect of interpretation of any provisions contained in FTP, or classification of any item in ITC (HS) or HPBvl or HPBv2, or Schedule of DEPB Rates (including content, scope or issue of an authorization thereunder) said question or doubt shall be referred to DGFT whose decision thereon shall be final and binding."

4.2 As per the above provisions of Foreign Trade Policy any doubt regarding classification of any item in ITC (HS) or HBPvl or HBPv2 or schedule of DEPB Rates should be referred to DGFT whose decision shall be final and binding. As per the clarification/opinion of Joint Director General of Foreign Trade, New Delhi, surplus fuel stored in fuel tanks of vessels/ship brought for breaking up is classifiable under 89.08 along with the main vessel. In this regard, Paras 18 & 19 of case law Cine Land v. CC, Chennai (supra), relied upon by the appellants, following has been held by CESTAT, Chennai :-

"18. We find that the appellants had applied to the DGFT, New Delhi for a Merely because the reply was signed by the JDGFT, its validity cannot be discarded. The JDGFT is a Senior Officer in the office of the DGFT. The reply is from the DGFT as per the letter-head. Therefore, obviously the JDGFT has issued it acting in the office of DGFT as per their internal procedures. There are thou.sands of importers and exporters who apply for such clarifications to the DGFT. It sounds to reason that it would be physically impossible for one DGFT to personally sign replies to these apart from his numerous other responsibilities. Secondly, here there is no certification required of a named authority in the body of a fiscal notification concerning exemption from Customs duty. Such a clarification required from only a named authority is a different requirement than the issue of a clarification on import policy. Therefore, we cannot agree with ld. DR that the clarifica-tory letter needs to be rechecked by a reference to the DGFT on whether it reflects the opinion of DGFT as it is signed by JDGFT.

19. We also find that it is now a well settled law that clarifications on Import Policy issued by office of DGFT is binding on Customs as far as ITC Policy is concerned in view of the decisions cited by Id. Senior Advocate supra clarification on these items' classification under ITC (HS) and the ITC Policy."

5. In view of above, 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.

6. In view of the above, appeals filed by the appellants are allowed with consequential relief, if any.

(Operative part of the order pronounced in Court)

Equivalent 2014 (308) ELT 0418 (Tri. - Ahmd.)