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TMI Blog2008 (11) TMI 135X X X X Extracts X X X X X X X X Extracts X X X X ..... nvestigation and issue of show cause notice, Commissioner of Customs passed an order classifying the imported goods under CTH 1511 90 90 of Customs Tariff Act, confiscated the seized goods and allowed them to be redeemed on payment of redemption fine of Rs. 5 lakhs, demanded customs duty of Rs. 28,05,134/- and also imposed penalty on the importer as well as Shri Ramji Dass Agarwal, Proprietor of M/s. Gwalior Soap & Chemical. The importer and Shri R.D. Agarwal are in appeal against the order of the Commissioner. 2. Heard both the sides. The main issue to be decided in this case is whether the goods imported by the appellant can be classified under CTH 3823 19 00 or it is classifiable under 1511 90 90. The Commissioner has come to the conclusion on the basis of following grounds 2.1 The chemical test report dt. 2-4-2007, which reads as under :- "The sample is in the form of dull white soft pasty mass. It is having the following characteristics. 1. %FFA (as Palmitic acid) : 9.1 2. Melting point : 550C 3.&nbs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly done by crystallization either with or without solvent. The liquid part (commercially known as oleic or olein) consists of oleic acid and other unsaturated fatty acids (e.g. linoleic and linolenic acids) together with small amounds of saturated fatty acids. The solid part (commercially known as stearic acid or stearin) consists mainly of palmitic and stearic acids with a small proportion of unsaturated fatty acids. …….. …….. …….. Distilled fatty acids, which are obtained after hydrolytic splitting of various fats and oils (e.g: coconut oil, palm oil, tallow) followed by a purification process (distillation). 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 characterized by a high free fatty acid (ffa) content. 3.2 According to him in view of the note, the Palm Stearin imported by them is classifiable under 3823 11 only. 3.3 Further, he also relies upon the Hasleys Condensed Chemical Dictionary in support of his contention that what has been imported is Palm Steanin only. In addition he also cited US Custom Ruling on the issue of classificatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssification. 4.2 He drew the attention to para 5 of the circular of the Board referred by the Commissioner, which specifically states that Palm Steam falling under 3823 is a free fatty acid and does not contain any ester. 5.1 After considering submissions from both the sides, it is seen that; (a) The imported goods are in the form of dull white soft solid mass and has the following characteristics as per the chemical test report : 1. %FFA (as Palmitic acid) : 9.1 2. Melting point : 55°C 3. Iodine value : 34.0 4. Ester value : 180.0 The sample under reference is having the characteristics of RBD Palm Stearin with Palm Fatty Acid distillate; it is other than Mixed Fatty Acid." (b) The characteristics vary between the three reports and for convenience sake, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e fact that the product cannot be classified as PFAD, the US Custom Ruling also would not help the appellants. (g) The Chemical Examiner has clearly reported that the product is having characteristics of RBD Palm Stearin with PFAD and it is other than Mixed Fatty Acid. Going by the Chemical Examiner's reports, the product has to be classified under 1511. No evidence in the form of any other report or technical literature to support the argument that the product is PFAD or industrial fatty acids or does not contain ester have been put forth by the appellants. (h) In view of the above discussions, it is quite clear that the imported product is correctly classifiable under 1511 90 90 as decided by the Commissioner. In view of the above position, the product attracts tariff value and therefore revision of the value by the Commissioner has to be upheld. 5.2 As regards confiscability, it is noticed that in the bill of entry, appellants had declared the item as Mixed Fatty Acid whereas on chemical test, it has been found to be other than Mixed Fatty Acid. Further it is also noticed that the appellants had enclosed a test report issued by Pt.KJS, independent surveyor, wherein analysis r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ier as Mixed Fatty Acid. Report issued by the supplier also declares the product as Mixed Fatty Acid of industrial grade. The same were duly supported by certificate of analysis issued by the supplier. The said evidences produced by the appellant do not stand rebutted by Revenue by making any enquiry at the supplier's end. 10. I would like to reproduce two contending entries below : Chapter 15 Animal or vegetable fats, oils, waxes etc. 1511 Palm oil and its fractions, whether or not refined, but not chemically modified 1511 10 00 Crude oil 1511 90 Other 1511 90 10 Refined bleached de-oderised palm oil 1511 90 20 Refined bleached deoderised palmolein 1511 90 90 Other Chapter 38 Miscellaneous chemical products 3823 Industrial monocarboxylic fatty acids; acid oils from refining; industrial fatty alcohols 3823 11 Industrial rnonocarboxylic fatty acids; acid oils from refining: Stearic acid Palm stearin: 3823 11 Crude 3823 12 RBD 3823 19 Other 3823 11 90 Other Stearic acid or Stearin 3823 12 00 Oleic acid 3823 13 00 Tall oil fatty acid 3823 19 00 Other As is seen from the above, for the goods to fall under Chapter 15, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... circular of the Board. 13. I further note that according to the product specification given in the Palm Oil Refiners' Association, Malaysia, the palm oil is having melting point of 30°C and Iodine value as 13.5 whereas the melting point in the sample has been found to be 55°C with Iodine value around 34-36. As such, the product can not be held to be palm oil. 14. At this stage, I would also like to refer HSN explanatory note, extracts of which already stand reproduced in the order proposed by my learned brother. According to the said note, Stearin or Stearic acid results as a process of saponification or hydrolysis of natural fats or oil and the solid part emerging as a result is known as steam and falls under Chapter 38. Inasmuch as the chemical examiner has himself held product to be having characteristic of stearin, I would hold that Chapter 38 is the appropriate chapter to cover the goods in question. 15. At this stage, I would also like to refer to US Customs Ruling on the issue of classification of Palm Fatty Acid Distillate given vide HQ W967992 dt. 2-6-07. While considering the issue as to what is the proper classification of Palm Fatty Acid Distillate, it was held that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nbsp; Archana Wadhwa Member (Technical) &nb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... extensively to chemical literature on palm oil. In this scenario, it has become necessary to examine the chemistry of palm oil and its fractions. 21. The learned SDR has produced chemical literature on palm oil sourced from Wikipedia (an encyclopedia), Bailey's "Industrial Oils & Fats Products" as also from the homepage of a Malaysian Palm Oil Refinery. The authenticity of the literature is not in question. According to this literature, palm oil is mainly composed of glyceryl esters of long chain Fatty Acids, which are products of a chemical reaction (called 'esterification') between Glycerol and Fatty Acids. This esterification can be represented by the following chemical equation: CH2 - OH + R1 - COOH CH2 - OOC - R1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated. If a molecule of glycerol is esterified with only two molecules of Fatty Acid, the resulting ester will be a 'diglyceride' and, if a molecule of glycerol is esterified with only one molecule of Fatty Acid, the resulting ester will be a 'monoglyceride'. 22. Palm oil is composed mainly of triglycerides, both saturated and unsaturated. In the presence of heat and water, some triglycerides break up by a process called 'hydrolysis'. Hydrolysis of a triglyceride can yield Free Fatty Acid (FFA) and diglyceride or monoglyceride as shown below : CH2 - OOC - R1 CH2 - OOC - R1 CH - OOC - R2 CH - OOC - R2 + R3 - COOH CH2 - OOC - R3 + H2O CH2 - OH Triglyceride Water Diglyceride FFA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee Fatty Acids and the same is also called 'Palm Fatty Acid Distillate'. Thus we have three main products resulting from physical refining of crude palm oil viz. 'RBD paim-stearin', 'RBD palmolein' and Free Fatty Acids (FFA) otherwise called 'Palm Fatty Acid Distillate' (PFAD). 23. The Chemical Examiner's reports, which are seen reproduced in the order recorded by the learned Member (Technical) of the regular Bench, indicate that the samples were composed of Free Fatly Acids (estimated as palmitic acid) in the range 3.2 — 19.4%; Melting Points were in the range 53 — 55°C, Iodine Values were in the range 34 — 36.7 and Ester Values were in the range 148.4 - 198.4. The Chemical Examiner further opined thus : "The sample under reference is having the characteristics of RBD Palm Stearin with Palm Fatty Acid Distillate; it is other than Mixed Fatty Acid." It is pertinent to note that this opinion was given against the following query raised in the relevant Test Memos: "To ascertain whether the sample is Palm Stearin/Mixed Fatty Acid/Palm Fatty Acid Distillate or otherwise." The Chemical Examiner's opinion has to be understood with reference to this query. I have found no inconsistency b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ow : 3823 Industrial monocarboxylic fatty acids; acid oils from refining industrial fatty alcohols - Industrial monocarboxylic fatty acids; acid oils from refining : 3823 11 -- Stearic acid : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atty acids 3823. 19 -- Other I must say that the sub-classification under SH 3823 11 of Tariff Headir 3823 is grossly erroneous and misleading inasmuch as 'Palm Stearin', which contains only glycerides of Stearic Acid and similar other fatty acids and does not contain free 'Stearic Acid' has been sub-classified under 'Stearic Acid' (SH 3823 11), one of the industrial monocarboxylic fatty acids classified under Heading 3823. On the other hand, conspicuously, there is no sub-classification under SH 3823.11 (Stearic Acid) of HSN Heading 38.23. In other words, SH 3823.11 represents Stearic Acid as one of the industrial monocarboxylic fatty acids falling under HSN Heading 38.23, while SH 3823 11 (Stearic Acid) of Tariff Heading 3823 (industrial monocarboxylic fatty acids) includes Palm Steam, which is, by any stretch of imagination, not the same as Stearic Acid. In this scenario, SH 3823 11 of Tariff Heading 3823 cannot be considered to be aligned with SH 3823.11 of HSN Heading 38.23. The reliance placed by the learned counsel on HSN Explanatory Notes is, therefore, not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nocarboxylic fatty acids as declared in the Bill of Entry, it would have stood excluded from Chapter 15 by virtue of the above Chapter Note and would have been classifiable under Heading 3823 in Chapter 38. But the fact which stands proved in this case is that the appellants had imported a product composed of RBD Palm Steam and PFAD, which resulted from physical refining of palm oil without chemical modification. In the result, the claim of the Revenue for classifying the goods under SH 1511 90 90 stands eminently established. 27. Accordingly, I hold that the appeals are required to be disposed of in the manner proposed by the learned Member (Technical) of the regular Bench. It is ordered accordingly. Records shall be placed before the regular Bench for pronouncement of the majority decision. Sd/- (P.G. Chacko) Member (Judicial) FINAL ORDER 28. In view of the majority decision, the imported product has also to be classified under CTH-1511 90 90 and revision by the value of the Commissioner is also upheld. 29. Imposition of the redemption fine of Rs. 5 Lakhs in lieu of confiscation and penalty imposed by the Commissioner on the importers and Shri R.D. Agarwal are also upheld ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bsp; B.S.V. Murthy & ..... X X X X Extracts X X X X X X X X Extracts X X X X
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