2016 (8) TMI 873 - AT - Customs

Classification of soyabean oil by-product in the course of manufacture of lecithin SEZ unit - classified under Customs Tariff heading 15079090 as other than crude oil - classified under 15071000 as crude oil, whether or not degummed Held that - the essence of the dispute is that the soya oil emerging as a by-product continues to be a crude soya oil even though it has undergone many chemical process during the course of manufacture of lecithin powder. Admittedly, it is not of edible grade. However, that is not the only reason for classifying it as crude oil. The nature of the product has to be arrived at by its chemical quality and standards, if any, applicable to them. The lower authority examined the nature of the product as per the chemical report; applied the parameters mentioned in Indian Standards specification. Thereafter the findings were recorded to the effect that the impugned product is to be correctly classified as crude oil, whether or not degummed appeal dismissed decided against Revenue.

Summary

Issues: Correct classification of soyabean oil emerging in the course of manufacture of lecithin by the respondent in their SEZ unit.

Analysis:
1. Classification Dispute: The primary issue in this case revolves around the correct classification of soyabean oil generated during the manufacturing process of lecithin. The dispute is whether the soyabean oil should be classified under Customs Tariff heading 15079090 as a product other than crude oil or under 15071000 as crude oil, whether or not degummed.

2. Contentions of the Parties: The Revenue argues that the soyabean oil is not of edible grade and is a by-product of lecithin production, thus should not be classified as crude oil. On the other hand, the respondent maintains that they have consistently classified the product as soya crude oil under CTH 15071000 and that the lower price compared to another unit is due to different manufacturing processes.

3. Examination of Manufacturing Process: The Tribunal reviewed the detailed process of manufacturing lecithin powder from liquid lecithin, which involves the generation of soyabean oil. The nature of the product was assessed based on chemical analysis, Indian Standards specifications, and independent examination of the manufacturing process and resulting by-product.

4. Legal Interpretation: The Tribunal analyzed the relevant tariff headings, specifically 15071000 for "crude oil" and 15079090 for other products. Emphasis was placed on the edible grade distinction, with the Revenue arguing for classification under 15079090 due to the product's non-edible grade status. However, historical classification, chemical quality, and standards were deemed crucial in determining the product as "crude oil, whether or not degummed."

5. Decision and Rationale: After thorough consideration, the Tribunal upheld the respondent's classification of the soyabean oil as 'crude soya oil' under 15071000. The Tribunal found no merit in the Revenue's appeal, emphasizing the continuous classification practice, chemical quality assessment, and lack of evidence to support a change in classification. The appeal by the Revenue was dismissed, affirming the respondent's classification of the soyabean oil.

This detailed analysis highlights the core issue of classification, the arguments presented by both parties, the examination of the manufacturing process, legal interpretation of relevant tariff headings, and the final decision based on historical practices and product quality assessment.