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TMI Blog2013 (6) TMI 40X X X X Extracts X X X X X X X X Extracts X X X X ..... tion. Discrimination - held that:- If importer in a different State gets benefit of exemption whereas the importers of the State of Gujarat is deprived of such benefit, they will not be able to compete with importers of other States in the same field of business. On that count also, we are of the view that the plea of the Revenue is not tenable. Impact of Non filing of appeal in earlier case - held that:- By taking benefit of Article 14 of the Constitution of India, one cannot get benefit of a wrong order, but at the same time, when Committee of Commissioners has decided to accept the decision and decided not to prefer appeal, as it appears from the affidavit of the Revenue, the present case cannot be said to be one of acceptance of a wrong order when the decision not to prefer the appeal is of the Committee of Commissioners and is a positive decision. Crude palm oil imported, which falls within Serial No. 1511 having acid value of more than 4, is entitled to get benefit of exemption of duty, and such exemption cannot be taken away by adding to the words in the notification as “ between 4 and 10”. - Decided in favor of assessee. - Special Civil Application No. 1051 of 201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cturing units of refined edible oils under the Brand Names of Naturefresh , Gemini , Sweekar , etc. by refining crude edible oils including crude palm oil (edible grade). One of such units of the Petitioner is located at Survey No. 415, National Highway 8-A, P.O. Bhimasar, Taluka - Anjar, Dist. Kutch, Gujarat. The refined oils being manufactured by the Petitioner out of such crude edible oils conform to the specifications prescribed under the provisions of the Food Safety and Standards Act, 2006 and the applicable Regulations. 3.2 The manufacturing unit of the Petitioner located at Kutch is registered with the Central Excise Authorities bearing Central Excise Registration Number AAACC3269JXM006. Further, it is also registered under Customs (Import of Goods at Concessional Rate of Duty for the Manufacture of Excisable Goods) Rules, 1996 bearing Registration Number GIM/CUS/CIPL-09/08-09, dated 30-12-2008 and has been following the procedure laid down under the said Rules for import of Crude Palm Oil. For the consignment which is the subject matter of dispute, the Petitioner had furnished a Bond in November 2011 under the said Rules. 3.3 The manufacturing unit of the Petitioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The FFA content of parcel of 15049.895 MTs was found to be 4.13% at discharge Port (Equivalent Acid Value being 9.04%) and the FFA content of balance 2000 MTs which was part of the second parcel of 15499.472 MTs was found to be 5.03% (Equivalent Acid Value being 11.02%). 3.11 On learning about the arrival of the abovesaid consignments at the port of Kandla, the Petitioner filed Bill of Entry No. 5580614, dated 27-12-2011 for clearing the entire cargo of 17049.895 MTs under Section 46 of the Customs Act, 1962 before the proper officer for clearance of goods for home consumption as prescribed under Section 47 of the Customs Act. The description of the goods as per Bill of Entry(s) is as follows - Tariff Item No. 1511 10 00 CRUDE PALM OIL (EDIBLE GRADE) IN BULK 3.12 The Customs and the Public Health Officer (PHO) drew samples from the vessel and thereafter the Customs assessed the goods vide Bill of Entry No. 5580614, dated 27-12-2011 and Out of Charge ( OOC ) order was given for clearing the same by allowing exemption from Customs duty vide Customs Notification No. 21/2002-Cus., dated 1-3-2002. Without receiving a positive report from the Port Health Officer, Customs would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. Union of India Ors. - AIT-2011-260-HC = 2012 (278) E.L.T. 433 (S.C.) is directly applicable to the facts of their case, wherein the Hon ble High Court has held that once the goods conformed to the Customs notification by having acid value greater than 4, the Customs cannot refuse the benefit of the concessional rate of duty. 3.15 The Petitioner did not receive any response to their letter dated 6-1-2012. and therefore, issued another letter, on 12-1-2012, requesting the Respondent No. 4 to draw separate samples for the purpose of any chemical analysis to determine the acid value of the imported goods. The Petitioner also provided the chemical analysis report of an independent surveyor, M/s. Inspectorate (Singapore) Pvt. Ltd., a Bureau Veritas Group Company, issued at the Load Port, which showed that the imported goods had an FFA of 4.07 and an Acid Value of 8.19 at the time of loading. Further, the discharge report at the time of the discharge of the goods at Kandla by the independent surveyor showed that FFA content was only 4.13. The Petitioner also indicated in the letter that a total quantity of 30,549.367 M.T. of crude palm oil was imported on board the ship containing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th the said Laws call for harmonious construction. 3.22 It is relevant that, the standard of edible oils is under the Food Safety and Standards (Food Products Standards and Food Additives) Regulations, 2011 and the respective standards of different edible oils are prescribed under the Heading 2.2.1(1) to 2.2.1(24) there under. In so far as Palm Oil is concerned, the standard thereof is under Regulation 2.2.1(19) wherein Palm Oil has been defined as follows : 19. Palm oil means the oil obtained from fleshy mesocarp of fruits of the oil palm (Elaeis Guinensis) tree by the method of expression or solvent extraction. It shall be clear, free from rancidity, suspended or other foreign matter, separated water, added colouring and flavouring substances or mineral oil. It shall conform to the following standards, namely : Butyro-refractometer reading at 50 C 35.5 - 44.0 Or Refractive Index at 50 C 1.4491-1.4552 Melting point (capillary slip method) Not more than 37 C Iodine value (Wij s method) 45-56 Saponification value 195-205 Unsaponifiable matter Not more than 1.2 per cent Acid value Not more than 10.0 Indigenously produced raw Palm Oil obtained by method of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat insofar as the Customs Law is concerned, the Government has been conscious of the provisions of the erstwhile Prevention Food Adulteration Act, 1954 and the Prevention of Food Adulteration Rules, 1955 repealed and replaced by the Food Safety and Standards Act, 2006 and the Food Safety and Standards (Food Products Standards and Food Additives) Regulations, 2011 respectively and the Government has put the Supplementary Note-1 under Chapter 15 of the Customs Tariff Act, 1975 to the following effect :- In this Chapter, edible grade , in respect of goods (i.e. edible oils) specified in Appendix B to the Prevention of Food Adulteration Act, 1955, means the Standard of quality specified for such goods in that Appendix. 3.27 Customs Laws (Notification 21/2002-Cus., dated 1st March 2002 as amended) provides that import of Crude Palm Oil having Acid Value of 4 and above would be permitted to import for refining the same and the Food Safety and Standards (Food Products Standards and Food Additives) Regulations, 2011 provides that the refined oil manufactured out of imported Palm Oil has to meet the Standard of edible oil prescribed under Regulation 2.2.1(16) and 2.2.1(19) except in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Acid Value 4 and above is not edible oil as such. 3.32 In the present case it is not the case of the Respondents that the Crude Palm Oil (Edible Grade) imported by the Petitioner is edible as such or the same is meant for sale before refining. It is also not in dispute that in the unit of the Petitioner the said imported Crude Palm Oil would be made edible oil of the Standard 2.2.1(16) with acid value not more than 0.5. It is pertinent to mention that the Acid value is the measure of free fatty acid in crude oil and by refining free fatty acid can be removed by use of alkali from 30% to 0.5 or less than 0.5 as will be evident from Board Circular 29/97, dated 31st July, 1997. The manufacturing unit of the Petitioner is capable of bringing down the Acid value from 15% to less than 0.5% as will be evident from the Certificate of Plant manufacturer. 3.33 There is no dispute that the imported Crude Oil is having the requisite Acid value more than 4 and the same conforms to the Standard prescribed under Notification 21/2002-Cus., dated 1st March, 2002 (as amended) in all respects. Accordingly, it is apparent that the import thereof has been consciously permitted by Customs Laws, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... port of palm oil having more than 0.5% acid contents but puts restriction for further purification if intended to be used as vegetable edible oil, an item of food within the meaning of the Act of 2006. 3.39 It is relevant that the definition of food contained in Section 3(j) of the Act of 2006, the declaration in the bill of entry did not claim it to be a food within the meaning of the said Act i.e. 3.(j) food means any substance, whether processed, partially processed or unprocessed, which is intended for human consumption and includes primary food to the extent defined in Clause (zk), genetically modified or engineered food or food containing such ingredients, infant food, packaged drinking water, alcoholic drink, chewing gum, and any substance, including water used into the food during its manufacture, preparation or treatment but does not include any animal feed, live animals unless they are prepared or processed for placing on the market for human consumption, plants prior to harvesting, drugs and medicinal products, cosmetics, narcotic or psychotropic substances : Provided that the Central Government may declare, by notification in the Official Gazette, any other arti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... declare value, classification, description of goods, exemption notifications etc. Assessment of imported goods are done on the basis of declaration made on the statutory documents under the Self-Assessment Scheme and such goods are not subjected to any checking/examination. Presently at Kandla more than 50% of imported goods are assessed under the Self-Assessment Scheme without such checking/examination. Since the Government has reposed considerable faith in the importers under the said Scheme, the importer will be liable to face the legal consequences under the Customs Act for any mis-declaration in any material particular in such documents. Therefore, making of a true and proper declaration in documents is the prime responsibility of the importer under the self-assessment scheme. 4.2 Brief facts of the case according to the respondents : (a) The vessel MT Horizon Voy. No. TCV 09/11 carrying about 30,000 MTs of goods declared as Crude Palm Oil of Edible Grade, arrived at Kandla Port on 25-12-2011. The shipping agent concerned filed Import General Manifest, declaring therein that the goods carried in the vessel is Crude Palm Oil of Edible Grade. It may be mentioned that IGM ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were got further tested at the Central Revenue Control Laboratory, Government of India, Custom House, Kandla, which reported that the acid value of the consignment was 11. The Port Health Officer, Kandla was also requested to forward the duplicate samples drawn from the consignment to the appellate laboratory, i.e., the Central Food Laboratory at Pune for further test, which confirmed that the PHO, Kandla s report was wrong and the acid value of the goods were 10.56 (i.e., more than 10). In view of these categorical findings from two statutory laboratories (CRCL, Kandla and Central Food Laboratory, Pune), the goods appeared to be chargeable to 100% Customs duty. In this case the duty liability is approximately Rs. 66 crore and the same were placed under detention. (e) Crude Palm Oil falls under Chapter 15 of the First Schedule to the Customs Tariff Act, 1975. Supplementary Note 1 of Chapter 15 states that : Edible Grade in respect of goods (i.e., edible oil) specified in Appendix B of the Prevention of Food Adulteration Rules, 1955 means the standard of quality specified for such goods in that Appendix. (f) Appendix B of the Prevention of Food Adulteration Rules, 1995 (A. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y extraction an oil shall continue to be considered as crude , provided it has undergone no change in colour, odour or taste when compared with corresponding oil obtained by pressure Nil - 5 Condition No. 5 of the exemption states that the importer should follow the procedure set out in Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 1996. (j) The presence of the term edible grade in the Exemption above clearly indicates that the exemption is primarily available only to goods of edible grade and not to goods which are not of edible grade. The conditions like Acid Value should be more than 4 and that Carotenoid contents should be in the range of 250 mg/kg. to 2500 mg/kg., will be applicable only after it is confirmed that the goods are of edible grade. In case the goods are not of edible grade, then these subsequent conditions will not be applicable. The term Edible grade has to be read in terms of supplementary notes to chapter 15 as the exemption is applicable only to chapter 15 and, therefore, in terms of Appendix B of Prevention of Food Adulteration Rules, 1955. Since the Appendix B of these Ru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on intelligence report that the acid value of the consignments was more than 10, the goods were got tested and the misdeclaration was detected. The notification benefit being claimed by the importer was on the premise that the imported Crude Palm Oil was of Edible grade but based on the test report as detailed hereunder, the imported goods are not as declared. 4.4 The term Edible grade is defined in Supplementary Note 1 of Chapter 15 of Customs Tariff as under : 1. In this Chapter, edible grade , in respect of a goods (i.e. edible oil) specified in Appendix B to the Prevention of Food Adulteration Rules, 1955, (PFA) means the standard of quality specified for such goods in that Appendix. 4.5 As per this Note, this term edible grade has to be read according to Appendix B to the Prevention of Food Adulteration Rules, 1955 (PFA). According to the specification given in Appendix-B of the PFA Rules, the Palm Oil should have acid value less than 10. Thus, reading the Supplementary Note 1 of chapter 15 along with Appendix B of the PFA Rules, indicates that Palm Oil of edible grade should have acid value less than 10 and that if it is more than 10, it cannot be treated as of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lue was 11, i.e., more than 10, the appeal was filed with the PHO, Laboratory, Pune which confirmed that the sample had acid value more than 10. Thus, it becomes evident from the test results of PHO that the cargo imported in MT. Horizon is not eligible for exemption. 4.10 The Circular No. 29/97-Customs, dated 31-7-1997 was followed by Circular No. 40/2001-Cus., dated 13-7-2001. This circular states in para 5 that if it is viewed that crude palm oil containing free fatty acids, acid value higher than the limits prescribed under the PFA Act, 1954 falls in the category of the edible grade, because it can be subsequently refined to make it fit for human consumption, then the concessional rate provided under serial number 29 of the table annexed to the Notification 17/2001 may be redundant and would defeat the intention of the Government for giving the concessional duty for crude oils used for industrial purposes and not for edible purposes . Thus the circular acknowledges that it may not be correct to say that crude palm oil containing free fatty acids, acid value higher than the limits prescribed under the PFA Act, 1954 should be treated as of edible grade because it can be subseq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct, 1955. 5. The Revenue subsequently filed further affidavit sworn on 9th February 2012 wherein the Revenue has almost verbatim reiterated and repeated what has been stated hereinabove in paragraphs 4.2 (f), (g), (h), (I), (j) and has further stated that :- 5.1 So far as the goods imported are liable to 100% duty and the claim for exemption can be made only if it meets with the aforementioned requirements, and, therefore, the petitioners are not entitled to exemption. 5.2 The petitioner herein has imported Crude Palm Oil falling under sub-heading 1511 10 00 of the First Schedule to the Customs Tariff Act, 1975. The said sub-heading do not provide for the edible grade. However, for claiming the benefit of exemption the Crude Palm Oil must be of edible grade as further defined in Chapter 15 of the First Schedule to the Customs Tariff Act, 1975 by way of Supplementary Note meaning thereby Edible Grade in respect of goods (i.e., edible oil) specified in Appendix B of the Prevention of Food Adulteration Rules, 1955 means the standard of quality specified for such goods in that Appendix. 5.3 There is an upper limit of acid value 10 for availing the exemption. 5.4 If the not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s as a prohibitive goods but its contention is that this type of goods is not entitled to exemption under the Customs Notification No. 21 of 2002 as the acid value is more than 10 and for that reason, it has permitted provisional release of the goods on conditions. 7. It further appears from records that pursuant to the decision of the Calcutta High Court holding that the similar goods were not prohibitive ones and consequently, passing direction for deciding the question of duty, the Commissioner (Appeals), Kolkata, on adjudication, in Appeal No. KOL/CUS/CKP/ 213/2011 held that the goods in question is an exempted goods in terms of Sl. No. 30-II of Notification No. 21/2002-Customs, dated 1-3-2002 as amended, and against such decision, the Revenue has decided not to prefer any appeal as the Committee of Commissioners has decided to accept such decision. 8. Therefore, the only question that arises for determination in this application is whether the Revenue was justified in refusing the benefit of exemption Notification No. 21, dated 1st March 2002, Sl. No. 30 as amended simply because on chemical analysis of the sample drawn from the consignment it was observed that the acid va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dible grade, namely, (A), (B) and (C) would be fully exempted by giving specific description of those three categories. 13. We are unable to accept the contention advanced on behalf of the learned advocate for the Revenue that we should read the notification as acid value of 4 or more but not more than 10 instead of 4 or more as indicated in the exemption notification by taking aid of the schedule of the Prevention of Food Adulteration Rules because in our opinion, help of supplementary notes under Chapter 15 cannot be taken when Heading 1511 under Chapter 15 does not contain any goods of edible grade. 14. It is not a case where the petitioner has falsely declared the goods as refined vegetable oil and consequently, a food within the meaning of Food Safety and Standards Act, 2006 and was ultimately found to be unfit as a food. On the face of the declaration that the same was crude palm oil (edible grade) which falls under part (II) of Serial No. 30 of the exemption notification, it cannot be legitimately contended that such item became a prohibited goods within the meaning of the Customs Act. 15. Even if we look at the definition of food contained in Section 3(j) of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Food Adulteration Rules, 1955 which has no application to the facts of the present case when the petitioners intended to import the same not as a food but as crude palm oil (edible grade) as pointed out in the exemption notification. 19. The Supreme Court in the case of Commissioner of Central Excise, Shillong v. North-Eastern Tobacco Co. Ltd. reported in 2002 (53) RLT 625 (S.C.) = 2002 (146) E.L.T. 490 (S.C.) further held that interpretation of an exemption notification should be, as far as possible, liberal to the language thereof, provided no violence is done to the language employed. In the case before us, if we alter the limit of acid value from 4 and more to between 4 and 10, it will be a direct violation of the language of the notification. 20. At this juncture, it will be also profitable to refer to the decision of the Supreme Court in the case of Jayaswals Neco Ltd. v. Commissioner of Central Excise, Nagpur reported in 2006 (195) E.L.T. 142 (S.C.) = 2007 (8) S.T.R. 305 (S.C.) where the Supreme Court has laid down as a proposition of law that if the Department accepted a principle laid down in an earlier case, it should not be permitted to take a contrary stand i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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