2020 (6) TMI 362 - AT - Customs

Import of Palm Oil - Validity of test reports sent by the chemical examiner of the Customs Department and the reports given by the Port Health Officer - Benefit of N/N. 21/2002-Cus as amended - denial of benefit on the ground that the imported oil is not of Edible Grade - HELD THAT - Determining the importability of the oil in question and if it is not importable acting against the imported goods and the importer is the responsibility of the Customs officers. No action has been initiated in the imports which are the subject matter of these appeals because the Revenue accepted the test report of the PHO that it meets the standard as per A 17.19 of the Appendix to the Prevention of Food Adulteration Rules. This is also explicit in the denovo order of the original authority. Having accepted that the consignment meets this standard Revenue took a diametrically opposite stand with respect to the same consignments and the same standards while determining the eligibility of the exemption notification. In our considered view such as a contradictory stand is not sustainable. The assessing officer cannot hold that the consignment meets standard as per A17.19 while deciding the importability and hold that it does not meet the same standards while deciding the eligibility of the exemption notification. It would have been a different case if the standards prescribed for the exemption notification are different from that for determining the importability but such is not the case - Revenue having accepted that the consignments meet standards A17.19 and hence are edible and accepting their importability cannot take a stand that the consignments do not meet the same standards and are therefore not edible while deciding the eligibility of exemption notifications. Appeal allowed - decided in favor of appellant.

Issues Involved:
1. Eligibility for concessional rate of duty under exemption Notification No. 21/2002-Cus for imported palm oil.
2. Conflict between test reports from the Port Health Officer (PHO) and Customs Laboratory.
3. Applicability of strict interpretation of exemption notifications as per legal precedents.

Detailed Analysis:

1. Eligibility for Concessional Rate of Duty:
The appellant, an importer of palm oil, filed five Bills of Entry in January and February 2005, declaring the oil as edible grade to avail a concessional rate of duty under Notification No. 21/2002-Cus. The exemption notification specified conditions for crude palm oil of edible grade, including an acid value of 4 or more and total carotenoid concentration within a specified range. The central issue was whether the imported oil met these conditions to qualify for the concessional rate.

2. Conflict Between Test Reports:
Samples were tested by both the Port Health Officer (PHO) and the Customs Laboratory. The PHO certified the oil as fit for human consumption, while the Customs Laboratory reported higher acid values (exceeding 10) and carotenoid concentrations, indicating the oil was not of edible grade. This discrepancy led to provisional assessments and subsequent show cause notices denying the concessional rate based on the Customs Laboratory's findings. The First Appellate Authority partially allowed the appeal for three Bills of Entry filed after 04.02.2005, but rejected it for the first two Bills, leading to appeals from both the assessee and the Revenue.

3. Applicability of Strict Interpretation of Exemption Notifications:
The Revenue argued that exemption notifications should be strictly construed against the assessee, citing the Supreme Court's decision in the case of Dilip Kumar and Company, which mandates that any ambiguity in exemption notifications should favor the Revenue. They also referenced a similar case, Kimmi Steels Pvt Ltd., where conflicting test reports led to the denial of exemption benefits, a decision upheld by the Supreme Court.

Judgment Analysis:

Importability and Classification:
The Tribunal noted that the Revenue accepted the PHO's report for importability under the Prevention of Food Adulteration Act but contradicted itself by rejecting the same standards for determining the eligibility of the exemption notification. The Tribunal found this dual stance unsustainable, emphasizing that the same standards (A17.19) should apply consistently for both importability and exemption eligibility.

Legal Provisions and Responsibilities:
The Tribunal highlighted various legal provisions, including Sections 5 and 6 of the Prevention of Food Adulteration Act and Sections 110, 111, and 112 of the Customs Act, which empower Customs officers to act against non-compliant imports. The Tribunal pointed out that the Revenue did not initiate action against the imports based on the PHO's favorable report, thus contradicting their stance on the exemption eligibility.

Conclusion:
The Tribunal concluded that the Revenue, having accepted the PHO's report for importability, could not reject the same standards for exemption eligibility. Therefore, the appeals filed by the assessee were allowed, and the appeal by the Revenue was rejected, granting consequential relief to the assessee.

Order Pronounced:
The order was pronounced on 12.06.2020 in open court.

This comprehensive analysis ensures that all relevant issues are covered, maintaining the legal terminology and significant phrases from the original text.

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