2022 (2) TMI 369 - AT - Customs

Benefit of Notification NO. 89/2005-Cus dated 4.10.2005 - Import of Crude Palmolein Oil (of edible grade) - edible oil - DEPB scheme - amount not paid in cash has been debited to their DEPB account - Revenue neutral situation - Whether the Crude Palmolein Oil (Edible grade) imported by the appellant is eligible for full exemption or exemption to the extent of 50% under the notification 89/2005? - HELD THAT - Edible oils will be an oxymoron because with few exceptions (such as olive oil) oils cannot be consumed as such but must be cooked with other things such as vegetables. Rice and wheat are not edible crops because they require a lot of processing such as threshing de-husking polishing milling washing cleaning kneading and rolling (in case of wheat) and cooking for them to be edible. Even vegetables such as cauliflower and potatoes are inedible until they are cooked. Except fruits and a few others there are no edible crops. Thus edible can only mean fit to be eaten and cannot mean fit to be eaten or consumed as such . It is for this reason undisputedly the oil imported by the appellant was described as Crude Palmolein oil (edible grade) which is evidently edible oil and not one which is fit only for industrial or other uses. The fact that it needs to be refined being consumed makes no difference and it is still edible such as rice and wheat are edible. It is now a well established legal principle that the Chapter Notes Section Notes and Rules of Interpretation of the Customs Tariff are meant to interpret the tariff and they cannot be applied to interpret exemption notifications. The description of the goods in any exemption notification must be interpreted as they are commonly understood. Of course if the exemption notification indicates both the Description of goods and the Customs Tariff heading it needs to be decided if the goods fall under the Customs Tariff heading for which purpose the Chapter Notes Section Notes and Rules of Interpretation must be applied. The description of the goods must be taken as are commonly understood. In this case the documents show that the imported goods were understood to be of edible grade. After assessing the Bill of Entry a Show Cause Notice demanding duty under Section 28 of the Customs Act was issued by the adjudicating officer although for only half the quantity. Assessment of Bill of Entry is a quasi-judicial function and once assessment is completed it can either be appealed against before the Commissioner (Appeals) under Section 35 of the Customs Act or a Show Cause Notice can be issued under Section 28. The nature of power under Section 28 is a power to re-open and reassess. Thus in this case the Bill of Entry has been reopened by the Revenue. If the same goods imported described and classified identically and cleared through the same ex-bond Bill of Entry are now sought to be assessed as a single lot instead of two lots by the appellant claiming benefit of the notification for the entire quantity there are no good reason not to allow it when the assessment has been re-opened by the Revenue by issuing a notice under section 28 of the Customs Act. The appellant would be entitled to get benefit of the exemption notification for the entire quantity of the goods imported in the Ex- bond Bills of Entry which are the subject matter of these two appeals. As half the duty has already been paid in cash and debit in respect of the remaining half has already been made in the DEPB account the demand of duty and interest cannot be sustained. Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Classification of Crude Palmolein Oil (Edible grade) as 'Edible oil' or 'Goods other than edible oil'.
2. Eligibility for full exemption or 50% exemption under Notification No. 89/2005.
3. Consideration of the entire quantity cleared under the same Bill of Entry as one lot for exemption purposes.
4. Sustainability of the demand of duty along with interest upheld in the impugned order.

Issue-wise Detailed Analysis:

1. Classification of Crude Palmolein Oil (Edible grade):
The appellant argued that Crude Palmolein Oil (Edible grade) is not edible oil as it is not fit for consumption without refining. The Tribunal rejected this argument, stating that 'edible' means 'fit to be eaten' and does not imply 'fit to be eaten as such'. The Tribunal emphasized that the term 'edible oil' should be understood in its common usage, which includes oils that need processing before consumption. Thus, Crude Palmolein Oil (Edible grade) is classified as 'edible oil' under the notification.

2. Eligibility for Exemption:
The Tribunal examined Notification No. 89/2005, which provides a 50% exemption for edible oils and full exemption for other goods. The appellant contended that since the term 'edible oil' is not defined in the notification, the definition from the Customs Tariff should be adopted, which aligns with the Prevention of Food Adulteration Act. The Tribunal dismissed this, stating that Chapter Notes and definitions from other laws cannot be applied to interpret exemption notifications unless explicitly stated. Therefore, the appellant is eligible for only 50% exemption as per the notification.

3. Consideration of Entire Quantity as One Lot:
The appellant sought to treat the entire quantity cleared under the same Bill of Entry as one lot for exemption purposes, arguing that they paid 50% duty in cash and the remaining 50% through DEPB credit. The Tribunal found merit in this argument, noting that the Revenue had reopened the assessment under Section 28 of the Customs Act. Consequently, the Tribunal allowed the appellant's prayer to treat the entire quantity as one lot, thereby extending the benefit of the exemption notification to the entire quantity.

4. Sustainability of Demand for Duty and Interest:
Given the Tribunal's decision to treat the entire quantity as one lot and extend the exemption benefit accordingly, the demand for duty and interest upheld in the impugned order could not be sustained. The Tribunal set aside the impugned orders, allowing the appeals with consequential relief to the appellant.

Conclusion:
The Tribunal concluded that Crude Palmolein Oil (Edible grade) is classified as 'edible oil' and eligible for 50% exemption under Notification No. 89/2005. The appellant's request to treat the entire quantity cleared under the same Bill of Entry as one lot was accepted, leading to the setting aside of the demand for duty and interest. The appeals were allowed with consequential relief to the appellant.