2008 (11) TMI 135 - AT - Customs

Palm oil products - Mixed Fatty Acid - whether the goods imported are classifiable under CTH 3823 19 00, as claimed by appellant or under 1511 90 90 - Imported goods are not simply mixed fatty acid but are mainly composed of glycerides of stearic acid along with free fatty acids - classification under CTH 3823 not justifiable further for classification of Palm Stearin, sub-classification under SH 3823 11 of HSN Heading 3823, is erroneous Palm Stearin classifiable under 1511

Issues Involved:
1. Classification of imported goods.
2. Applicability of Notification No. 21/2002-Cust.
3. Confiscation and redemption fine.
4. Imposition of penalty on the importer and other individuals.

Detailed Analysis:

1. Classification of Imported Goods:
The primary issue was whether the imported goods should be classified under CTH 3823 19 00 or CTH 1511 90 90. The Commissioner classified the goods under CTH 1511 90 90 based on several grounds, including chemical test reports indicating the presence of Palm Stearin characteristics and high ester values, which are not typical of Mixed Fatty Acid. The appellants argued that the goods should be classified under CTH 3823 19 00, citing the characteristics of RBD Palm Stearin with PFAD and relying on the explanatory notes of Chapter 38 and chemical dictionaries.

The Tribunal considered the chemical test reports and the Board's Circular No. 81/2002-Cus, which clarified that Palm Stearin under 1511 is a triglyceride, whereas stearin under 3823 is a free fatty acid. The Tribunal concluded that the high ester values indicated the presence of triglycerides, supporting the classification under 1511 90 90.

2. Applicability of Notification No. 21/2002-Cust:
The appellants claimed the benefit of SI. No. 139 of Notification No. 21/2002-Cust, which prescribed a basic customs duty of 15%. However, this benefit was contingent on the correct classification of the goods. Since the goods were classified under CTH 1511 90 90, the Tribunal upheld the Commissioner's decision to revise the value and apply the appropriate duty.

3. Confiscation and Redemption Fine:
The Tribunal upheld the confiscation of the goods based on the misdeclaration by the appellants. The goods were declared as Mixed Fatty Acid, but chemical tests revealed otherwise. The Tribunal found the redemption fine of Rs. 5 lakhs reasonable and upheld it.

4. Imposition of Penalty:
The Tribunal upheld the penalties imposed on the importer and Shri R.D. Agarwal. The misdeclaration and subsequent investigation revealed deliberate attempts to avoid higher duty payments. The penalty on the importer was Rs. 3 lakhs, and on Shri R.D. Agarwal, it was Rs. 1 lakh, both of which were deemed reasonable.

Separate Judgments:
Member (Judicial):
The Member (Judicial) differed, arguing that the goods should be classified under Chapter 38, citing the supplier's description and the exclusion of chemically modified goods from Chapter 15. The Member emphasized the high free fatty acid content and the characteristics of Palm Stearin, which should fall under Heading 3823.

Third Member:
The Third Member resolved the difference, supporting the classification under CTH 1511 90 90. The Third Member highlighted the chemical composition and refining process of palm oil, concluding that the imported goods, being a mixture of RBD Palm Stearin and PFAD, fit under the specified heading.

Final Order:
In view of the majority decision, the Tribunal classified the imported product under CTH 1511 90 90, upheld the revised value by the Commissioner, and maintained the imposition of the redemption fine and penalties.

(Pronounced in the open Court on 17-11-2008)

Sd/- Archana Wadhwa, Member (Judicial)
Sd/- B.S.V. Murthy, Member (Technical)

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