Bunker Supply Of Fuel To ASEAN Explorer Is Duty-Free Export: CESTAT Quashes Excise Demand Against Bharat Petroleum

P.A. Augustian (Judicial Member) and Pullela Nageswara Rao (Technical Member) examined whether the supplies of High Viscosity Furnace Oil (HVFO) made by Bharat Petroleum to the vessel 'Cable Ship ASEAN Explorer' qualify as duty-free exports under Rule 19 of the Central Excise Rules, 2002 read with Notification No. 46/2001-CE(NT), or whether such supplies are liable to Central Excise duty as the vessel cannot be considered as a 'foreign-going vessel' under Section 2(21) of the Customs Act, 1962.

In this case, the assessee/Bharat Petroleum is engaged in the manufacturing of various petroleum products and also operates an Export warehouse.

The assessee was using the services of private tank operators for the storage and barge delivery of the fuel to the vessels. The assessee was receiving the said 'NIL' Duty product under the cover of ARE-3 and warehousing the goods.

The assessee stores the Furnace Oil (FO), i.e., 'Nil' Duty product, into warehousing premises and further supplies the same as Bunker to Foreign Bound Vessels.

The Department alleged that the assessee has supplied High Viscosity Furnace Oil (HVFO) as 'Nil' duty supplies of bunker to the vessel “Cable Ship Asean Explorer” on 30.12.2011 and 01.03.2012 which was not on a foreign run and was on coastal run and that the bunker supplies to “Cable Ship Asean Explorer” without payment of excise duty was with an intention to evade payment of duty.

Accordingly, a show-cause notice was issued to the assessee. The Adjudication Authority confirmed the demand with interest and equal penalty. Aggrieved by the order, the assessee filed an appeal before the Commissioner (Appeals), which was rejected.

The assessee referred to the case of ASEAN Cableship Pvt. Ltd. v. Commissioner of Customs, Cochin, 2020 (374) E.L.T. 597 (Tri.-Bang.) where it was held that the vessel ASEAN Explorer is a foreign-going vessel, within the ambit of (ii) of Section 2(21) of the Customs Act, 1962, being engaged for performing repair/cable laying activities in the designated areas in terms of the Agreement with SEAIOCMA………As the vessel is held to be a foreign-going vessel and that the exemption under Section 87 of the Customs Act, 1962 is available, the seizure of the vessel and consequent imposition of redemption fine in lieu of confiscation need to be set aside along with penalties imposed on both the appellants….

The bench observed that the Department filed an appeal against the above Tribunal order before the Kerala High Court, wherein the Kerala High Court affirmed the CESTAT's order and dismissed the Department's appeal reported in Commissioner of Customs, Cochin v. ASEAN Cableship Pvt. Ltd., [(2025) 32 Centax 259 (Ker.)].

The bench held that for the same vessel, an order confirming demand of customs duties was passed, holding that it was not a “foreign-going vessel” as defined under section 2(31) of the Customs Act, which order was set aside by the CESTAT in the ASEAN Cableship Pvt. Ltd. v. Commissioner of Customs, Cochin, 2020 (374) E.L.T. 597 (Tri.-Bang.).

The Tribunal further held that the appeal filed by the Revenue against the said decision was rejected by the Kerala High Court, and following the same, the demand of central excise duty from the assessee cannot be sustained.

“In view of the above discussion and following the decision of the Hon'ble High Court of Kerala, the bunker supplies of High Viscosity Furnace Oil (HVFO) made by M/s. BPCL to the vessel 'Cable Ship ASEAN Explorer', qualify as duty-free exports under Rule 19 of the Central Excise Rules, 2002, read with Notification No. 46/2001-CE(NT), therefore the impugned order is liable to be set aside”, stated the Tribunal.

In view of the above, the Tribunal allowed the appeal.

Case Title: Bharat Petroleum Corporation Ltd. v. Commissioner of Central Excise, Cochin

Case Number: Excise Appeal No. 20476 of 2018

Counsel for Appellant/ Assessee: Bharat Raichandani

Counsel for Respondent/ Department: Vinod Kumar Garhwal

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