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TMI Blog2016 (8) TMI 397X X X X Extracts X X X X X X X X Extracts X X X X ..... stillate is characterised by high free fatty acid which cannot be 25%. So the by-product is rightly discarded by the Commissioner as not coming within the nomenclature of PFAD. Contrary reasons which are given by the Tribunal, thus, do not appeal to this Court. In this view of the matter, reliance on subsequent notification of 2006 is of no relevance. Period of limitation - impugned notification time barred - Held that:- the question has to be decided keeping in view the facts of each case and to examine whether the period in question is reasonable or not. In the instant case, it is found that it is only through intelligence collected by DRI, Gandhidharn Regional Unit that it came to be revealed that the assessee had imported crude palm oil but it had no facility in manufacturing soap/Industrial Fatty Acid and was using the said imported crude palm oil for making edible products like refined oil/Vanaspati. At the time of import, the importer only gives declaration. It is the actual use, which event takes place much after the import, from where it can be gathered as to where the import is made for the purpose for which it was done. As soon as the aforesaid information was gathere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only when the said crude oil is to be used in the manufacture of soap or Industrial Fatty Acid. The assessee in the present case have been manufacturing refined edible oil out of the said crude oil. The assessee did not have facilities for saponification and fat splitting in their factory. The manufacturing process is one of distillation. As a result of this process, a product called Palm Fatty Acid Distillate emerges. The assessee after the processing of the imported 8435.816 metric tons of crude oil (non-edible grade) has manufactured 2219.895 metric tons of palm fatty acid distillate (industrial grade) i.e. approximately 25% and approximately 70% as refined palm oil. 5) Having regard to the aforesaid facts, the appellant/Revenue was of the view that the assessee was not entitled to the benefit of Notification No. 21/2002 read with Notification No. 66/2004. The Department, thus, issued show cause notice to the assessee demanding custom duty in the sum of ₹ 7,89,89,868/- under para 8 of Customs (Import of goods at concessional rate of duty for manufacture of excisable goods) Rules, 1996 (hereinafter referred to as the 'Rules') as well as interest under Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant for improvement on clarity and for removal of sediments and particles if any; the treated PFAD was then fed to fat splitting plant; in fat splitting plant, unconverted glycerides present in PFAD were converted into free fatty acids (crude fatty acid) and glycerine at a designed pressure; in the second step, crude fatty acid was hydrogenated with hydrogen in presence of nickel catalyst; in hydrogenation reaction all the double and triple bonds were converted into single bond; the hydrogen required for hydrogenation reaction was produced by steam reforming of natural gas; after hydrogenation reaction catalyst was removed by filtration in leaft type filter and colour was improved by bleaching with the activated carbon and diatomite earth in a bleacher, finally filtered and bleached hard fatty acid was homogenized and flaked as un-distilled stearic acid; in case of distilled stearic acid, hydrogenated fatty acid was distilled in distillation plant and distillate produced was homogenized and flaked as distilled stearic acid; PFAD could be used for the manufacturing of different types of fatty acid (stearic acid and fatty alcohol); PFAD could also be used for the manufacture of soaps ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice on the premise and presumption that PFAD is Industrial Fatty Acid. On facts, it was held that crude palm oil imported by the assessee was not used for the manufacture of Industrial Fatty Acid, as the admitted fact was that as a result of the manufacturing process of the assessee, approximately 75% of the product is refined edible oil and only 25% is PFAD (by quantity). View taken by the Adjudicating Authority was that when the notification lays down the condition that the crude palm oil must be used by Industrial Fatty Acid, it means that its use must be substantive and not nominal. In other words, at least the crude palm oil should be primarily used for the manufacture of Industrial Fatty Acid, which was admittedly not the case. 11) In nutshell, on the aforesaid basis, Adjudicating Authority confirmed the demand raised in the show cause notice by holding that the assessee did not fulfill the conditions contained in the exemption notification. 12) The assessee preferred an appeal against the order of the Adjudicating Authority. Said appeal has been decided by the Custom Excise and Service Tax Appellate Tribunal (hereinafter referred to as the 'Tribunal') vide impu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tly and in the instant case, the assessee has failed to fulfill the conditions laid down in the notifications. 14) Mr. Lakshmikumaran, learned counsel appearing for the respondent/assessee, on the other hand, submitted that the reliance placed by the Tribunal on HSN Explanatory Notes was perfectly justified and stressed upon the reasoning that was adopted by the Tribunal in this behalf. His further submission was that there are various methods/processes that may be used to produce Industrial Fatty Acids like hydrolysis, saponification, vacuum distillation, splitting, etc. Any of such processes may be used by an importer intending to avail the benefit under Sr. No. 30 of Notification No. 21/2002-Cus. The description for Sr. No. 30 during the relevant period did not specify any specific process to be followed by the importers, which implies that the importers were free to choose any of the different processes available. In this regard, amendment made to Notification No. 21/2002-Cus vide Notification No. 11/2006-Cus dated 01.03.2006 is important. For the first time, an entry (S. No. 30(A)) was introduced which also mentioned that the importer must have the facility for splitting of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learned senior counsel appearing for the Revenue is right in his submission that present case is not a case for classification of goods but relates to the admissibility of exemption notification. When the question arises as to whether exemption from tax/duty of a particular notification is available to assessee or not, the same has to be examined in terms of the said notification i.e. whether the stipulations and conditions mentioned in the said notification are fulfilled by an assessee to claim the benefit of the notification. Notification No. 21/2002 dated 01.03.2002, as amended by Notification No. 66/2004 dated 09.07.2004 is a general exemption notification which enlist number of products that are given full or partial exemption from payment of custom duty or additional duty. At Sr. No. 29 of this notification are edible oils falling under certain headings of Chapter 15. In contrast, goods mentioned at Sr. No. 30 (with which we are concerned) talks of non-edible goods having a Free Fatty Acid. The precise description of the goods which qualify for exemption from payment of custom duty is as under: (A) [All goods], other than edible grade, having Free Fatty Acid (FFA) 20 pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esence of steam as part of a refining process. Fatty acid distillate is characterised by a high free fatty acid (ffa) content. 21) It, thus, categorically stipulates that Fatty Acid Distillate is characterised by high free fatty acid which cannot be 25%. So the by-product is rightly discarded by the Commissioner as not coming within the nomenclature of PFAD. Contrary reasons which are given by the Tribunal, thus, do not appeal to this Court. In this view of the matter, reliance on subsequent notification of 2006 is of no relevance. 22) Insofar as contention of the assessee that the impugned notification is time barred, it is difficult to accept the same in the facts of the present case. At the outset, we have to keep in mind Rule 8 of the Rules which does not prescribe any period of limitation. No doubt, in such an eventuality, as held by this Court in Bhatinda District Co-op Milk P. Union Ltd. (supra), the show cause notice has to be issued within a reasonable period. However, for this purpose, provisions of Section 28 cannot be resorted to to state that it has to be within a period of 6 months. The question has to be decided keeping in view the facts of each case and to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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