The Ahmedabad bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT ) held that fuel oil stored in the engine room bunker of ships imported for ship breaking was eligible for CENVAT credit.
The main issue involved in this case is whether the respondent, which is a ship breaking company, could claim Cenvat credit on CVD for fuel oil, high-speed oil, and lubrication oil in ship bunkers, as these goods are part of the ship and qualify as inputs under Rule 2(a) of CCR, 2004, used in manufacturing excisable goods during ship breaking.
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The revenue had appealed before the CESTAT. The counsel on behalf of the revenue contended that that the appellate authority wrongly relied on the Gujarat High Court’s judgement in Priya Holdings v. Commissioner of Customs Preventive (2013), as it does not relate to the issue of Cenvat credit. And due to which the order, based on this judgement, is not correct and should be set aside.
The counsel on behalf of the assessee submitted that the appellate authority rightly relied on the Gujarat High Court judgement in Priya Holdings, in which the High Court held that fuel oil in the engine room is part of the ship imported for breaking and should be treated the same as the ship for Cenvat purposes.
The CESTAT bench by relying on the above-mentioned judgement of the Gujarat High Court, noted that the fuel oil lying in the engine room is part and parcel of the ship which is imported for breaking, and the fuel oil cannot be given different treatment than the entire ship. The bench further noted that for the purpose of CENVAT, discrimination cannot be made between the entire ship and the bunker lying in the engine room.
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The CESTAT, comprising Ramesh Nair (Judicial Member) and C.L. Mahar ( Technical Member ) upheld the impugned order and dismissed the appeal filed by the Revenue.
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