2015 (9) TMI 713 - AT - Customs

Import of Crude Palm Oil - Benefit of Exemption notification-21/2002-Cus Drawing and testing of sample Appellant, to claim benefit of exemption notification no. 21/2002-Cus, produced test-report of load port issued by internationally acclaimed independent test laboratory Revenue also drew samples in presence of representative from appellant company and found that as per report of private test agency, carotenoid content was above 500 mg/kg, whereas Dy. Chief Chemist found carotenoid content to be lower than 500mg/kg Hence, exemption was denied Held that - Chemical Examiners admitted that they were not aware with method of drawing of samples Samples were stored in plastic bottles although Indian Standards required samples to be stored in steel containers Neither samples were drawn not stored as per required standard and in absence of prescribed apparatus for testing, Commissioner erred in relying upon test report of Dy. Chief Chemist Test reports are also vitiated due to delay in testing, ranging from 25 days to 82 days, placing reliance on technical literature referred to hereinabove, which provides that carotene is unstable characteristic, which changes with exposure to light, air and atmosphere Therefore, appellants have fulfilled condition of Notification No. 21/2002 (as amended) and they are accordingly entitled to exemption Appeals allowed in favour of importer-assessee Decided in favour of Assesse.

Issues Involved:
1. Eligibility for benefit of Exemption Notification No. 21/2002-Cus as amended by Notification No. 120/03-Cus for imported Crude Palm Oil (CPO).
2. Validity and reliability of the test reports determining carotenoid content in CPO.
3. Interpretation of the substitution of conditions in exemption notifications and its retrospective effect.
4. Proper procedure for drawing and storing samples as per prescribed standards.

Issue-wise Detailed Analysis:

1. Eligibility for Benefit of Exemption Notification:
The primary issue was whether the appellant, M/s Liberty Oil Mills, was eligible for the benefit of Exemption Notification No. 21/2002-Cus dated 1.3.2002, as amended by Notification No. 120/03-Cus dated 1.8.2003, for the imported Crude Palm Oil (CPO). The appellant claimed the exemption based on test reports from reputed laboratories which indicated carotenoid content above 500 mg/kg. However, the Dy. Chief Chemist's report from the government laboratory showed carotenoid content below 500 mg/kg, leading to denial of the exemption.

2. Validity and Reliability of Test Reports:
The appellant contested the validity of the government laboratory's test reports on several grounds:
- The carotenoid content in CPO is volatile and decreases over time, making the timing of sample testing critical.
- The samples were not drawn and stored according to the prescribed standards (IS:548 (Part-I)-1964), which require storage in steel containers and testing using a Spectrophotometer as per British Standard 684.
- The method of drawing samples and the apparatus used for testing (Tintometer instead of Spectrophotometer) were incorrect.
- There was significant delay in testing the samples, which ranged from 25 to 82 days, potentially affecting the carotenoid content.

The Tribunal found that the samples were not drawn or stored as per the required standards and that the testing apparatus used was incorrect. The Tribunal held that the test reports from the government laboratory were unreliable due to these procedural lapses and delays.

3. Interpretation of Substitution in Exemption Notifications:
The appellant argued that the substitution of the carotenoid content requirement from 500 mg/kg to 250 mg/kg by Notification No. 7/2005 should be applied retrospectively from the date of the original notification (1.3.2002). The appellant relied on the Supreme Court ruling in Govt. of India Vs. Indian Tobacco Association, which held that substitution in notifications has retrospective effect unless specified otherwise.

The Tribunal did not decide on the retrospective effect of the substitution, as it allowed the appeal on other grounds.

4. Proper Procedure for Drawing and Storing Samples:
The Tribunal emphasized the importance of following the prescribed standards for drawing and storing samples. The proper officer is obligated to draw samples correctly as per the standards, and any deviation from this procedure renders the test reports unreliable. The Tribunal held that the appellant's representative's failure to object at the time of sampling did not waive the requirement of following the prescribed standards.

Conclusion:
The Tribunal allowed the appeals in favor of the appellant, holding that the test reports from the government laboratory were unreliable due to non-compliance with prescribed standards and delays in testing. The appellant was found to have fulfilled the conditions of the exemption notification and was entitled to the benefit of the exemption. The appeals were allowed with consequential relief in accordance with the law.

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