CESTAT Ahmedabad Sets Aside Customs Duty On Shipping Corporation, Says HPCL Certified Diesel Duty Paid

The Customs, Excise, and Service Tax Appellate Tribunal (CESTAT), Ahmedabad, has partly allowed an appeal filed by The Shipping Corporation of India Ltd., setting aside the duty demand on diesel oil supplied to a vessel.

The tribunal held that the Commissioner (Appeals) erred in rejecting a certificate issued by Hindustan Petroleum Corporation Ltd. (HPCL) certifying the supply as duty paid, without assigning any cogent reason.

A bench of Judicial Member Dr. Ajaya Krishna Vishvesha set aside the demand of duty and interest on 49.431 MT of diesel oil supplied to vessel MT Arun Khetar Pal via Bunker Delivery Note dated March 13, 2008.

The Commissioner (Appeals) had declined to accept HPCL's certificate dated September 17, 2010, which certified that the diesel supplied was duty-paid, holding that a foreign-going vessel is eligible to receive duty-free bunkers and, therefore, the certificate could not be treated as conclusive proof.

Rejecting this reasoning, the Tribunal held that the reasoning given by the Commissioner (Appeals) for not accepting the certificate was not cogent or proper, observing:

“the learned Commissioner (Appeals) erred in rejecting the said certificate dated 17.09.2010 issued by M/s. HPCL, without assigning any cogent reason, certifying that the bunkers supplied to the said vessel were duty paid.”

The tribunal noted that HPCL was not only the charterer of the vessel responsible for fuelling it during the charter period but also the bunker supplier that had effected the supply of the diesel in question.

It held that the Commissioner (Appeals) was not justified in rejecting the certificate without cogent reason, and emphasised:

“I am of the view that even if a foreign going vessel is eligible to receive duty free bunkers, when HPCL the charterers and bunkers suppliers of the ship has certified that diesel oil supplied vide BDN dated 13.03.2008 was duty paid, then the Commissioner should have relied upon it.”

The Tribunal held that the Commissioner (Appeals) had erred in rejecting the certificate on the ground that a foreign-going vessel is eligible to receive duty-free bunkers.

Accordingly, it held that no duty or interest could be charged, assessed, or recovered on the said quantity of 49.431 MT of diesel oil. The remaining findings of the Commissioner (Appeals) were upheld, and the appeal was partly allowed.