Commissioner Of Customs, ... vs M/S Arani Agro Oil Industries Ltd

[Arising out of Order-in-Appeal No. 69/2008 dated 20/10/2008 passed by Commissioner (Appeals), Visakhapatnam)] For approval and signature :

HON'BLE SMT. ARCHANA WADHWA, JUDICIAL MEMBER HON'BLE SHRI ASHOK KUMAR ARYA, TECHNICAL MEMBER

1 Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? No 2 Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? No 3 Whether Their Lordships wish to see the fair copy of the Order? Seen 4 Whether Order is to be circulated to the Departmental authorities? Yes

Commissioner of Customs, VISAKHAPATNAM-II CENTRAL EXCISE BUILDING, PORT AREA, VISAKHAPATNAM  530035. Appellant(s) Versus

M/s ARANI AGRO OIL INDUSTRIES LTD NEAR OLD NFCL PARK, ADB ROAD, NEW PORT AREA, KAKINADA-533003. Respondent(s)

Appearance:

Mr. N. Jagdish, A.R. For the Appellant Ms. Neethu, Advocate. For the Respondent

Date of Hearing: 15/07/2015 Date of Decision: ..

CORAM :

HON'BLE SMT. ARCHANA WADHWA, JUDICIAL MEMBER HON'BLE SHRI ASHOK KUMAR ARYA, TECHNICAL MEMBER

Final Order No. 21760 / 2015

PER ARCHANA WADHWA

Being aggrieved with the order passed by the Commissioner (Appeals), Revenue has filed the present appeal. We have heard Mr. N. Jagdish, learned A.R. appearing for the Revenue and Ms. Neethu, learned advocate appearing for the respondents.

2. As per facts on records, the respondents, M/s Arani Agro Oil Industries Ltd. have imported 1492.308 Mt. of Crude Palmolein (edible grade) vide WBE No. 273, dated 16.09.2003 declaring the goods under sub-heading No. 15119090 of Customs Tariff Act 75 chargeable to BCD 70% and as per shore ullage, the quantity was 1488.308 Mt.

3. The samples were drawn in presence of the importer by both the Port Health Officer (PHO) as also the Customs officers and goods were assessed provisionally. Vide report dated 18.9.2003, the PHO confirmed the samples as having excess acid value and adulterated. The PHO further informed that the acid value was 9.83 and a sample was also forwarded to the Central Food Laboratory (CFL), Calcutta for further analyses and the Director of CFL vide letter dated 18.11.2003 opined that samples of Crude Palmolein was adulterated. Meanwhile, appellant approached Honble AP High Court and in terms of directive of Honble AP High Court in the Writ petition No. 24003/2003 dated 09.12.2003, the Assistant Commissioner allowed clearance of said goods provisionally on payment of duty vide Ex-bond Bill wherein appellant classified goods under 15111000 of CTA 75. The Honble AP High Court vide final order dated 082.2006, directed the Assistant Commissioner to proceed with finalization of assessment subject to decision of adulteration by the competent authority.

4. Besides, the samples (both on-board & shore tank) were forwarded vide 06 Test memos i.e., 1476 to 1481 of 2003, to the Chemical Examiner-Customs House Laboratory-Vizag revealed the Acid Value ranging between 5.29 to 5.66 and the total Carotenoid Concentration ranging between 363 to 422. Accordingly, observing due principles of natural justice and in consideration of the sample reports furnished by the PHO and Chemical Examiner, the Assistant Commissioner, vide Order No. 5/2008 dated 29.5.2008, finalized assessment by classifying goods as Crude Palmolein (other than Edible Grade) under 15111000 under CTA 75 and demanded duty-BCD @100%, SAD 4% at Tariff rate of $532 Pmt.

5. Aggrieved by the Order-in-Original, the appellant preferred an appeal before the Commissioner (Appeals) who held that (i) the adjudicating authority applying beta carotenoid values reclassified the goods in question with disregard to the Chapter notes of Ch. 15 of CTA 75; (ii) reports of both the PHO and CFL merely found to harp on the Acid Value without evidencing other parameters as provided in Item 17.20 of Appendix B of PFA Rules 1955; (iii) the reliance place by the adjudicating authority on two different reports of PHO and Chemical examiner amounts to selective reliance; (iv) the adjudicating authority has not given due consideration to Notification No. 40/2001-Cus dated 13.7.2001 and (v) the proviso to Section 2(m) of the PFA Act 1954 should have been given due consideration. Accordingly, he allowed the appeal by setting aside the order of adjudication.

6. Being aggrieved with the said order of the Commissioner (Appeals), the Revenue filed present appeal on the following grounds :

Upon examination of the order in appeal, it is found that the order passed by the Commissioner (Appeals) is not legal and proper.

(a) The Supplementary note 1 to Chapter 15 states that "edible grade" in respect of goods (i.e. edible oil) specified in Appendix B to the PFA Rules 1955 means the standard of quality specified for such goods in that appendix". In addition, as a member of the World Trade Organisation (WTO), India has to implement the CODEX standards that area set of international standards for food quality and safety to protect the health of consumers and accordingly, the Govt. of India prescribed relevant standard in respect of such edible oils by specifying the range of carotenoid concentration in terms of composition characteristics 2.6 of CODEX STANDARD 210-1999 for named vegetable oils as (i) carotenoids treated as precursors of Vitamin A; (ii) studies have shown that carotenes also possess the protective properties against various types of Cancer and (iii) the presence of Carotenoids offer oxidative protection to the OIL, by themselves being oxidised first prior to the triglycerides.

(b) The benefit of concessional rate of duty under Notification No. 21/2002-Cus, dt. 01.03.2002 can be extended only if the acid value is below 06 for the Item A 17.20 vide Appendix B of PFA Rules 1954, in relation to the imported Oils and the carotenoid concentration shall be within the prescribed range of 500 to 2500 mg/Kg, in terms of Notification No. 120/2003-Cus, dt. 01.08.2003 which fact was re-iterated in the Circular No. 85/2003-Cus, dt. 24.09.2003.

(c) Therefore, the standards prescribed vide a Notification under Customs Act 1962 are equally applicable to the relevant chapters of Customs Tariff Act '75 by virtue of the Sections 2, 3, 4 & 13 of the Customs Tariff Act 1975 since the said sections made the Tariff Act applicable in tandem with the relevant provisions of the Customs Act 1962 and in fact the concessional rate applicable to goods under import are made effective by the Notification under Sec. 25 of Customs Act 1962.

(d) Thus, the classification of goods by the Assistant Commissioner in consideration of Carotenoid Values prescribed under Notification No. 21/2002-Cus, 01.03.2002 as amended, along with the standards prescribed under supplementary note 1 of Chapter 15, are very much in order and no discard is attributable in view of the facts and also since the appellate authority did not make out even a single discard and has not exhibited in clear terms except the rhetoric of wording in pursuance of the said Order. Hence, the contention lacks clarity and has no merits.

(e) The case law [ 1999 (105) ELT 494 (Trib)] relied upon by the Appellate authority dealt with the interpretation as to classification of Copper plates, sheets etc including the Alloys vis a vis, predominant metal of such alloys in terms of chapter heading & sub-heading and not as per common trade practice. Whereas, the instant case deals with the classification of goods on the basis of prescribed statutory standards and therefore, the relevancy does not hold merit and hence, not applicable even by ratio.

2. In testing the samples forwarded to them, it is for the said statutory Laboratories to satisfy themselves as to the prescribed parameters and communication of the relevant parameter for determination of the required standards to the authorities. In the Instant Case, the Acid value being the primary parameter evidencing the nature of goods (under import) i.e., edible or otherwise, the reports of both the Port Health Officer and the Central Food Laboratory-Calcutta stand to reason in terms of the supplementary note to the Chapter 15 read with PFA Rules, 1955. As such, the evidence provided by them is proper and relevant to the instant proceedings.

3. The PFA Act 1954 and rules made thereunder prescribed standards as to Adulteration or otherwise of the item A 17.20 under Food as per of Appendix B and the same is determined in the reports of both the PHO & the CFL. However, the standard of Carotenoid Concentration prescribed by the Govt. of India, under the Customs Act 1962 is not available in the said reports and hence, it has to be determined by the relevant authority i.e., the Chemical examiner of the Customs Laboratory and accordingly, the standard was determined by the Chemical Examiner. Thus, both the Tests as carried out by the two Authorities are in fitness of the case in terms of the supplementary note 1 to the Chapter 15 of CTA '75 which are under sanction of Law only being prescribed under the statutory authority of both the PFA Act 1954 and the Customs Tariff Act '75/Customs Act '62 and hence it is very much relevant and these facts were not considered properly by the Appellate authority.

4. Vide Para 2 of the Circular No. 40/2001-Cus, dt. 13.07.2001, as per Edible Oils Packaging (Regulation) Order 1998 of Ministry of Food and Consumer Affairs (Dept., of Sugar & Edible Oils), it was spelt out that the term "edible oil means vegetable oils and fats and includes any margarine, vanaspati, bakery shortening and fat spread as specified in the PFA Act 1954 and rules made thereunder for human consumption. The PFA Act 1954 has laid down the standards of Crude Palm Oil and prescribed the maximum limit of the acid value for CPO as 10.0". Thus, the same stand and the standard as prescribed in the PFA Act 1954 apply equally in un-ambiguous terms to the Crude Palmolein in the instant case wherein the Acid Value shall be below 06 with Carotenoid concentration ranging between 500-2500 mg/Kg. Thus, the classification of carried out by the Assistant Commissioner is very much in order and accordingly, the goods are to be tested for the standards to be confirmed at the time of importation only and not after their importation for supply to human consumption after refining, since the same is not contemplated under Customs Act 1962.

5. The standards at A 17.15 of PFA Rules 1954 are applicable for the goods of edible grade and issued for human consumption after refining, in which case also the acid value shall not be more than 0.5 after refining. Thus, the post importation conditions are not relevant to the goods which do not conform to the standards laid down under Appendix B of PFA Rules 1955 and as also the Customs Act 62. Hence for extension of concessional rate of duty under Notification No. 21/2002-Cus, dt. 01.03.2002 the goods shall be of edible grade with Acid value within the prescribed standard and conforming to the prescribed range of Carotenoid concentration.

6. The proviso to Section 2 (m) of the PFA Act 1954 is no way relevant as it was not found on any sound reasoning and the Commissioner (A) already held the contention of party "that the acid value is bound to increase with time is not technically correct and legally not sustainable", in his Orders-inAppeal Nos. 1/2007 V-II)-Cus & 2/2007 (V-II) Cus, both dt. 23.02.2007 relating to M/s. Kedia Overseas Ltd., and M/s. Shalimar Agro Tech Pvt Ltd., respectively.

7. Therefore, the Standards prescribed in terms of PFA Act 1954 & the Customs Act 1962 are mandatory and shall be fulfilled, for a Vegetable Oil to be considered as Edible Oil and the adjudicating authority relying on the reports of PHO & CFL and the Chemical Examiner classified the goods, as the Crude Palmolein (Other than Edible Grade) under 15111000 of the CTA '75 and not on any presumption as held by the Commissioner (A).

8. In view of the above stated reasons, the Order passed by the Commissioner(Appeals) is not legal and correct.

7. After hearing both sides and on going through the impugned order, we find that the Commissioner (Appeals) has granted relief to the respondent by finding faults with the order of the Assistant Commissioner and referring to certain lacuna in the order. We are informed that an identical issue was the subject matter of the Tribunals decision in the assessees own case reported as Arani Agro Oil Indus. Ltd. Vs. Commissioner of C.Ex. & Cus, Visakhapatnam [2010 (256) E.L.T. 627 (Tri.-Bang.)]. By observing that even though the Acid value was less than 6 and within the range, Carotenoid value was less than the prescribed limit of 500 - 2500 mg per kg, imported crude palm oil was not entitled to benefit of the notification in question. The said order of the Tribunal stands confirmed by the Honble Supreme Court when the appeal filed by the assessee was dismissed by the Honble High Court.

8. In view of the above, we do not intend to elaborately discuss on the submissions made both sides inasmuch as the issue stands decided against the assessee, in their own case. Accordingly, we set aside the impugned order of the Commissioner (Appeals), restore the order of the original adjudicating authority and allow the appeal filed by the Revenue.

(Pronounced in open court on ..)

(ASHOK KUMAR ARYA) TECHNICAL MEMBER (ARCHANA WADHWA) JUDICIAL MEMBER

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