A.G. ENTERPRISE Vs. COMMISSIONER OF CUS. (PREVENTIVE)

JUDGEMENT

(1.) ALL these appeals have been filed by the appellant with respect to the orders -in -appeal passed by the Commissioner (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. 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.

(2.) 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 for 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 Priya Holding (P) Ltd. v. C.C. (P) [ : 2013 (288) E.L.T. 347 (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: -

(3.) 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 HSD 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.