Bunker Supply of HVFO to ‘ASEAN Explorer’ Qualifies as Duty-Free Export; CESTAT Quashes Excise Demand Against BPCL
Sangeetha Prathap
The Bangalore Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that bunker supplies of High Viscosity Furnace Oil (HVFO) made by Bharat Petroleum Corporation Limited (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). The Bench comprising P.A. Augustian (Judicial Member) and Pullela Nageswara Rao (Technical Member) rejected the Revenue’s case that the vessel was not a “foreign-going vessel” and therefore bunker supplies should have been subjected to excise duty.
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The department had issued a show-cause notice alleging that BPCL supplied HVFO on 30 December 2011 and 1 March 2012 to the ASEAN Explorer while it was allegedly on a coastal run rather than on a foreign voyage, and that the NIL duty bunker supplies were made with the intention to evade payment of duty. The adjudicating authority confirmed the duty demand with interest and equal penalty, which was upheld by the Commissioner (Appeals). BPCL thereafter filed the present appeal before CESTAT contending that the supplies were made strictly under Rule 19 and Notification No. 46/2001-CE(NT), supported by ARE-1 and ARE-3 documentation, port clearances, shipping bills and acknowledgments from foreign ports.
During the hearing, BPCL relied on the Tribunal’s earlier decision in ASEAN Cableship Pvt. Ltd. v. Commissioner of Customs, Cochin, 2020 (374) ELT 597 (Tri-Bang.), wherein the same vessel ASEAN Explorer had been held to be a foreign-going vessel under Section 2(21) of the Customs Act, 1962, on the ground that it was engaged in submarine cable maintenance and repair operations under the South East Asia and Indian Ocean Cable Maintenance Agreement (SEAIOCMA). That decision held the vessel entitled to exemption under Section 87 of the Customs Act. CESTAT further noted that the Revenue’s appeal against that judgment had been dismissed by the High Court of Kerala in Commissioner of Customs, Cochin v. ASEAN Cableship Pvt. Ltd., (2025) 32 Centax 259 (Ker.), thereby affirming the finding that the vessel is a foreign-going vessel.
After reviewing the factual records and the binding judicial developments, the Tribunal held that the issue had attained finality. It observed that once the vessel has been judicially recognised as a foreign-going vessel, bunker supplies made to it from BPCL’s export warehouse under Rule 19 automatically qualify as duty-free exports. The Bench rejected the department’s attempt to reopen the issue by treating the vessel as coastal-running, noting that the Kerala High Court had specifically affirmed that occasional berthing in an Indian port does not deprive the vessel of its status as a foreign-going vessel.
Since the foundation of the excise demand — the notion that the ASEAN Explorer was not a foreign-going vessel — stood conclusively resolved in favour of the assessee by the High Court, the Tribunal held that the demand of duty, interest and penalties could not survive. It therefore set aside the impugned order and allowed BPCL’s appeal with consequential relief as per law.
Appearance
Counsel for Appellant/ Assessee: Bharat Raichandani
Counsel for Respondent/ Department: Vinod Kumar Garhwal
Cause Title: Bharat Petroleum Corporation Ltd. v. Commissioner of Central Excise, Cochin
Case No: Excise Appeal No. 20476 of 2018
Coram: P.A. Augustian (Judicial Member), Pullela Nageswara Rao (Technical Member)
