Clarifications from the DGFT regarding the classification of fuel and ship stores as integral parts of a vessel (Heading 89.08) are binding on Customs for ITC restrictions, exempting such items from import restrictions and associated penalties if duties are paid.

DR. AJAYA KRISHNA VISHVESHA :

These appeals are directed against impugned Order-in-Appeal dated 21.02.2020 passed by Commissioner (Appeals), Customs Ahmedabad though which the learned Commissioner (Appeals) rejected the appeals and upheld the Orders-in-Original.

M/s. Atlantic Shipping Pvt. Limited has filed 27 appeals as per particulars mentioned below:-

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The facts of the cases are that the appellant filed certain Bills of Entry on behalf of the Masters of the above vessels for conversion of the vessels from foreign run to coastal run and paid Customs duties for the approximate quantities of foreign origin bunkers and provisions likely to be consumed during coastal run of the vessels, in terms of instructions issued vide Board Circular No. 58/1997 dated 06.11.1997 alongwith bonds for provisional assessments of the Bills of Entry. During scrutiny for final assessment of the Bills of Entry, it was observed that Appellant classified the provisions under CTH 98051000 and the goods falling under CTH 98051000/98059000 are subject to restrictions as per Schedule 1 of ITC (HS) Classification of Export and Import items to the effect "Subject to value limit of Rs.2000 (CIF) and other conditions as specified in clause 3(1), (1) of Foreign trade (Exemption from Application of Rules in Certain Cases) Order, 1993." It was also observed that para 2.7 of Foreign Trade Policy prescribes that any goods export or import of which is restricted under ITC (HS), may be exported or imported only in accordance with an Authorization or in terms of a Public Notice issued in this regard, whereas the appellant had not submitted any permission /authorization /licence issued by the DGFT for importing goods falling under CTH 98051000 in excess of Rs.2000/-. Therefore, Show Cause Notices were issued to the appellant, demanding duty finally assessed along with interest; proposing confiscation of the provisions consumed during coastal run under Section 111(d) of Customs Act, 1962 and proposing to impose penalty on the appellant under section 112(a) of the Customs Act, 1962. The show cause notices were adjudicated, confirming duty, interest, confiscation, fine in lieu of confiscation and penalty as detailed in the table shown above. Aggrieved by the Orders-in-Original, the appellant filed appeals before learned Commissioner (Appeals) but the Commissioner (Appeals) rejected all the appeals and upheld the Orders-in-Original. Feeling aggrieved from the impugned Order-in-Appeal dated 21.02.2020, the present appeals have been filed by the appellant.

Learned Consultant for the appellant Shri Muralidhar M Panicker submitted that the DGFT, vide Office Memorandum, issued vide No. IPC/4/5(684)/97/82/PC-2(A)/649 to 651, have clarified in respect of fuel/oil (HSD and LDO) in ships/vessels imported for breaking that the fuel in the vessel is required for running the vessel. He submitted that they had no intention of trading the fuels and it has to be treated as a part of the vessel and not as a normal import. Moreover, the fuel is duty paid, hence the fuel oil classifiable under Chapter 27, should be treated as a part of the vessel and be allowed to be classified under Chapter 89.08. Similarly, in this case the Ship Stores i.e. provisions which have come along with the vessel, is for the consumption of the crew during its coastal run and the ship stores is not for trading. Further, the customs duty at the appropriate rate, on the quantity of ship stores which would be consumed by the crew during the coastal run, is already paid at the time of filing of the provisional Bill of Entry for the same. Whatever stores remain in the ship /vessel, upon reversion of the vessel to foreign run will remain in the vessel itself and at no point of time would be unloaded from the vessel. As the ship stores for the internal consumption of the crew of the vessel is duty paid and is not brought out of the vessel to the shore, the DGFT Rules and Regulations would