COMMISSIONER OF CUSTOMS Vs. J M INDUSTRIES

JUDGEMENT

(1.) PURSUANT to a reference application made by the applicant under section 130(A) of the Customs Act, 1962 (hereinafter referred to as "the Act") this court had admitted the reference by framing the following substantial question of law for determination and had called for a statement of case from the Tribunal: "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, 1985?"

(2.) THE facts stated briefly are that the respondent herein is engaged in importing ships for breaking, and accordingly, imported a ship MV VICTOR KINGISEPP for breaking-up. The respondent filed bills of entry dated 25.10.1993 with the Superintendent of Customs. Subsequently, a show- cause notice came to be issued to the respondent calling upon it to show cause as to why duty in respect of movable gears, stores and bunkers leviable under section 12 should not be recovered under section 28 of the Act. The Assistant Commissioner of Customs and Central Excise, after considering the defence of the respondent, dropped the demand in respect of duty on movable gears, stores, which were to be assessed with the vessel under heading 89.08 of the Customs Tariff Act and confirmed the duty of Rs. 65,936.50 being the duty on remaining fuel, oil and bunkers on board. In respect of the demand of Rs.65937/- the assessee carried the matter in appeal before the Commissioner (Appeals) submitting that when the vessel was purchased for breaking of 9670 LDT, they had paid the transaction value in respect thereof and duty was to be assessed on the said value. According to the respondent, the view taken by the Assistant Commissioner, that LDT of bunkers, that is, fuel and oil, is not included in the LDT of the vessel, was incorrect. The Commissioner (Appeals) held that the oil in the bunker was not the oil in the machinery. According to him, light ship weight does not include items of consumable or variable load, as liquids in double bottom tanks; therefore, weight of the bunkers is not included in the LDT. Whatever oil declared by the master of the vessel was not contained in the machinery of the vessel, and that the assessee had not produced any evidence that the fuel and oil declared by the master of the vessel was in the machinery of the vessel. The Commissioner (Appeals) observed that as per the survey report on which the assessee was basing its claim, bunkers were in the engine room, as pleaded by them. Referring to para 7 of the said survey report of Ericson & Richards (Gujarat) dated 5.10.93, the Commissioner (Appeals) held that the fuel and oil which is kept in the engine room is pumpable and cannot be considered as fuel and oil in engine or in machinery, and accordingly, upheld the order of the adjudicating authority that bunkers, that is, fuel and oil are covered under para 2(d) of the Board's Circular 37/96- Cus dated 03.07.1996 and cannot be classified under heading 89.08.

(3.) ON the other hand, Ms. Megha Jani, learned advocate appearing on behalf of the respondent, reiterated the submissions that had been advanced by the learned counsel for the respondent before the Tribunal. It was submitted that the fuel and oil contained in the bunkers, that is, in the engine room tanks are included in the LDT of the vessel and form an integral part of the vessel and as such fall within the ambit of para 2(d) of the Circular. The 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 2003 (153) ELT 104, against which the revenue had made a reference application before this court being CECGR No.14 of 2004 which had been admitted on an identical question of law and that by a judgment and order passed by this court today, the reference has been answered in favour of the assessee and against the revenue. It was submitted that thus the present case would be directly covered by the said decision of this court and accordingly the present reference is also required to be answered in favour of the assessee.