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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 ..... e claiming the benefit of Notification No. 1175/75-CE dated 30.04.1975. During the period September, 2003 to January, 2004, the assessee imported 1990.031 metric tons of crude palm oil. At that time crude palm oil having Free Fatty Acid (FFA) 20 percent, or more was eligible for concessional rate of duty under Notification No. 21/2002-Cus dated 01.03.2002. No condition was attached to avail that exemption. 3) We are not concerned with this import in the present appeal. Thereafter on 16.01.2004, Notification No. 21/2002-Cus dated 01.03.2002 was amended by Notification No. 20/2004-Cus dated 16.01.2004 wherein the words "for the manufacture of soap" were inserted in the original notification. 4) The assessee imported 8435.816 metric tons of crude palm oil (industrial grade) valued at Rs. 17,15,88,508/- and cleared the same on payment of customs duty of Rs. 3,47,95,453/- (@20% basic + 2% education cess) under Notification No. 21/2002-Cus dated 01.03.2002 read with Notification No. 66/2004-Cus dated 09.07.2004 during the period 12.09.2004 to 12.08.2005. As per the said notification, crude oil (non-edible oil) could be imported by paying customs duty @20% only when the said crude oil i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duct. (ii) A sample was also sent to Shri Narendra Kumar, Chemical Examiner, Customs House Laboratory, Kandla who has given his test report as under: "The sample is in the form of pale cream soft mass. It has the characteristics of palm fatty acid having FFA (as palmitic acid) = 87.1% by wt & Acid value 190.87" (iii) The Department also collected the evidence in the form of statements from various customers of the assessee including M/s Godrej Industries Ltd. and M/s Aquagel Chemicals Pvt. Ltd. These customers had deposed that the PFAD bought by them from M/s GAEL had to undergo extensive further processing before it was converted into fatty acid. Shri Murali S. Mukerjee, DGM, M/s Godrej Industries Ltd. deposed that Industrial Fatty Acids were used in soaps and industrial surfactants, personal care and cosmetics, rubber and tyres, plastic, coating and links, textiles auxiliaries, fabric care and lubricants and greases etc. On being asked about the process involved in converting Palm Fatty Acid Distillate (PFAD) to stearic acid, he stated that firstly the Palm Fatty Acid Distillate (PFAD) was fed to oil pre-treatment plant for improvement on clarity and for removal of sediments ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Adjudicating Authority, since the assessee was claiming the benefit of exemption notification it was to be examined as to whether assessee was covered by the said Notification No. 20/2002. According to him, in order to ascertain the meaning of the term "Industrial Fatty Acid", the proper test was trade parlance and the normal meaning which a knowledgeable person would attach to the term and not necessarily what is laid down in the HSN. Thereafter, the Adjudicating Authority discussed the statements of the representatives of the two customers as mentioned above, on the basis of which it was concluded that in technical and trade parlance, it cannot be said that PFAD is the same as Palm Fatty Acid and, therefore, it could not be called as an Industrial Fatty Acid. The Adjudicating Authority further held that this was supported even by HSN Explanatory Notes 28.23 wherein it states that "Industrial monocarboxylic fatty acids are generally manufactured by the saponification or hydrolysis of natural fats or oils". 10) Thereafter, the Adjudicating Authority discussed the second aspect raised in the show cause notice on the premise and presumption that PFAD is Industrial Fatty Acid. On f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to the extent of 25% that would suffice as the notification nowhere mentions any percentage yield of Industrial Fatty Acid. On the basis of the aforesaid reasoning, the Tribunal has allowed the appeal of the assessee and set aside the order passed by the Commissioner. 13) Feeling aggrieved by that order, present appeal is filed by the Department. Mr. K. Radhakrishna, learned senior counsel appearing for the Department, heavily relied upon reasoning adopted by the Commissioner on the basis of which it was held that assessee was not entitled to the benefit of exemption. Neat submission made by Mr. Radhakrishna was that there was a patent error committed by the Tribunal in relying upon HSN Explanatory Notes, little realising that the matter did not pertain to classification but exemption of a notification and in order to qualify for exemption from payment of the import duty under the said notification, the focus of the Tribunal should have been as to whether the assessee has fulfilled the conditions of the said notification. He submitted that exemption notifications were to be construed very strictly and in the instant case, the assessee has failed to fulfill the conditions laid d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n any case the entire demand is time barred inasmuch as Rule 8 provides for recovery of duty in cases where the goods imported are not used for intended purpose. He accepted that Rule 8 does not mention any specific time within which a show cause notice must be issued. However, his submission was that this Court in the case of State of Punjab v. Bhatinda District Co-op Milk P. Union Ltd. 2007 (217) ELT 325 (SC) has held that where no period of limitation has been prescribed, statutory authority must exercise its jurisdiction within a reasonable period. Referring to Section 28 of the Act, he submitted that since that Section prescribes 6 months for cases where there is no collusion or willful mis-statement or suppression of facts, period of 6 months should be treated as reasonable period of limitation. On that basis, the show cause notice which was issued on 24.03.2006 for the period 12.09.2004 to 12.08.2005 was time barred, submitted the learned counsel. 16) We have considered the respective submissions of learned counsel for the parties. 17) At the outset, we would like to remark that the learned senior counsel appearing for the Revenue is right in his submission that present cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure, 25% of fatty (palm) was produced and 75% was oil which was edible. Thus, when the main manufacturing activity relates to edible product which is 75%. If in the process 25% of fatty (palm) emerges as a by-product it cannot be said that first requirement of exemption notification is satisfied in the instant case. Even if Industrial Fatty Acid is to be treated as separate manufacturing activity and it is non-edible, the same is only to the extent of 25%. That, according to us, would not satisfy the requirement of the exemption notification in question. 20) We are in agreement with the reasoning adopted by the Commissioner that HSN Explanatory Notes, in case where exemption notification was to be construed, would only serve as guide and is not used to interpret the same. Even here, we find that the HSN in question categorically mentions the product which are included by the said heading and specifically mentions 'fatty acid distillate' as under: "Fatty acid distillate, obtained from fats and oils which have been subjected to vacuum distillation in the presence of steam as part of a refining process. Fatty acid distillate is characterised by a high free fatty acid (ffa) ..... X X X X Extracts X X X X X X X X Extracts X X X X
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