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Oswal Oil Refinery Vs. Collector of Customs - Court Judgment

LegalCrystal Citation
CourtCustoms Excise and Service Tax Appellate Tribunal CESTAT Delhi
Decided On
Reported in(1984)(18)ELT662TriDel
AppellantOswal Oil Refinery
RespondentCollector of Customs
Excerpt:
.....it has to be examined whether if it is manufactured in india, it would attract levy of excise duty. palmolein being a derivate of palm oil and nothing but processed palm oil would be exempt from excise duty under notification no. 150/64 and, therefore, on import, exempt from additional duty of customs. the process of conversion of palm oil into palmolein does not amount to "manufacture". admittedly, rbd palmolein is processed palm oil, the essential character and use of palm oil remaining the same despite the conversion. the conversion, therefore, does not amount to "manufacture" for excise purposes. (c) if palmolein is distinct and different from palm oil, it would fall under item 68-cet and would be exempt from duty in terms of notification no. 55/75-ce, dated 1-3-1975.6. during.....
Judgment:
1. The captioned appeals were originally filed as revision applications before the Central Government which, under Section 131-B of the Customs Act, 1962, have come as transferred proceedings to this Tribunal for disposal as if they were appeals filed before it.

2. Both appeals involve a common issue and are, therefore, disposed of by this common order, a copy of which shall be placed on each appeal file.

3. The issue is whether the product 'Palmolein' imported by the appellants is an unprocessed vegetable non-essential oil (VNE oil) eligible for exemption from additional (countervailing) duty of customs on the footing that indigenously produced unprocessed V.N.E. oil is exempt from the central excise duty leviable thereon under Item 12 of the Central Excise Tariff Schedule (CET) by virtue of Notification No.33/63-CE, dated 1-3-1963. The further question is whether or not the goods are Palm Oil within the meaning of Notification No. 150/64, dated 19-9-1964 which exempts palm oils from excise duty.

4. When the goods were imported and cleared through the customs, the authorities charged additional duty thereon with reference to Item 12-CET. Later, the appellants claimed refund of the additional duty paid. The Assistant Collector rejected the claims on the ground that the imported goods were refined, bleached and deodorized palmolein, a processed VNE oil liable to additional duty with reference to Item 12-CET. The matter was pursued in appeal. The Appellate Collector took the view that notwithstanding certain common characteristics between palm oil and palmolein, the two had to be regarded as entirely different products. He noted that the Indian Standards Specifications treated the two as different distinct products. The appeals were consequently rejected. It is against these orders that the appellants are pre- sently before us.

5. In the memorandum of revision applications/appeals, it has been urged that- a) RBD palmolein is not manufactured in India. For the purpose of levy of additional duty of customs, in terms of Section 3 of the Customs Tariff Act, 1975, the nearest similar class of goods is RBD palm oil. Indigenous palm oil is exempt from the excise duty leviable thereon under Item 12-CET in terms of Notification No. 150/64, dated 19-9-1964. Unprocessed palm oil was already exempt from excise duty by virtue of Notification No. 33/63, dated 13-3-1963. The latter Notification 150/64, therefore, exempts all varieties of palm oil whether processed or unprocessed. Imported RBD palmolein which belongs to or is akin to the class RBD palm oil, therefore, stands exempted from levy of additional duty.

(b) Since RBD palmolein is not manufactured in India, it has to be examined whether if it is manufactured in India, it would attract levy of excise duty. Palmolein being a derivate of palm oil and nothing but processed palm oil would be exempt from excise duty under Notification No. 150/64 and, therefore, on import, exempt from additional duty of customs. The process of conversion of palm oil into palmolein does not amount to "manufacture". Admittedly, RBD palmolein is processed palm oil, the essential character and use of palm oil remaining the same despite the conversion. The conversion, therefore, does not amount to "manufacture" for excise purposes.

(c) If palmolein is distinct and different from palm oil, it would fall under Item 68-CET and would be exempt from duty in terms of Notification No. 55/75-CE, dated 1-3-1975.

6. During the hearing of the appeals before us, Shri Harbans Singh, the learned Counsel for the appellants, submitted that his case was that palmolein was [nothing but a non-processed VNE oil which was unconditionally exempt from excise duty (and, therefore, on import, from additional duty of customs) under Notification No. 33/63. Further, that palmolein was nothing but palm oil which was wholly exempt from excise duty under Notification No. 150/64. The latter notification is an unqualified one and the definition of "processed" VNE oil in Notification 33/63 could not be imported into the former. He also submitted that palm oil was the nearest description to palmolein for the purpose of levy of additional duty and since palm oil was exempt, palmolein would also be exempt from duty.

7. On behalf of the Respondent, the learned Departmental Representative submitted that- (a) the issue stood resolved by the Tribunal's order No. 232/83-C, dated 10-5-1983 in appeal No. 797/79-C. In that decision, the Tribunal held that on import, palmolein did not qualify for exemption under Notification 150/64-CE because that notification exempted only palm oil and that palmolein was not the same thing as palm oil; (b) the onus of showing that palmolein was the same thing as palm oil lay on the appellants and they had not discharged it; (c) palm oil and palmolein are two distinct and different products.

In this connection, he relied upon certain passages occurring in the book "Fats and Oils : Chemistry and Technology" edited by R.J. Hamilton and A. Bhati (Applied Science Publishers, London). Refined palm oil is a product of refining of crude palm oil whereas palmolein is the product of fractionation of palm oil. That the two are different products is borne out by the fact that the I.S.I. Standards were different for them- IS : 8323-1977 for palm oil and IS : 8361-1977 for palmolein ; (d) Government's order-in-review in the case of Godrej Soaps Ltd. and Ors. reported in 1981 ELT 72 brought out the distinction in detail and decided that palmolein was not eligible for exemption from additional duty of customs ; (e) the levy of additional duty of customs is not dependent on whether like goods are manufactured in India. It would suffice if the imported goods belonged to a class or description of goods which were liable to excise duty. Reliance was placed on the High Court decision in Khandelwal Metal & Engineering v. Union of India and Ors. -1983 ELT 292.

8. We have carefully considered the submissions of both sides. The notifications to be considered are 33/63-CE, dated 1-3-1963 and 150/64, dated 19-9-1964. The former exempts from the whole of the excise duty- (b) processed VNE oils used in the manufacture of goods falling under Items 13, 14, 15 and 15A-CET. This part of the exemption is subject to certain stipulated conditions. The Counsel for the appellants had made it clear that the claim was not with reference to the use of palmolein for the manufacture of any of these specific pro- ducts. An explanation to the notification says that "processed" VNE oil means a VNE oil which has undergone, subsequent to its extraction, any one or more of 3 specified processes.

Thus, if palmolein is unprocessed VNE oil, it will be exempt by virtue of Clause (a) of Notification No. 33/63. The imported product being admittedly a refined, bleached and deodorised derivate of palm oil, it would not qualify for this exemption, even if it were to be considered as a sort of palm oil. The case will, therefore, need be considered with reference to notification 150/64.

9. The book "Fats and Oils : Chemistry and Technology" relied upon by the Departmental Representative describes the characteristics and uses of palm oil and palmolein. The book at page 237 has this to say : "What is meant by the fractionation of palm oil The major triglycerides or fat molecules in palm oil are oleodipalmitin, with a melting temperature of 35 C, and a palmitodiolein of melting temperature 19C. At room temperatures, the group of palmitodiolein triglycerides will normally melt, while the former remain solid, separating the palm oil into both liquid and solid fractions. The chilled palm oil can be filtered, the solid stearin remaining on the filter whilst the liquid olein is separated by flowing through the filter." The FFA (free fatty acid) content is 2.5% in the case of RRD palm oil while it is 0.10% in the case of RBD palmolein. The former is a product of refining of palm oil while the latter is a product of fractionation of palm oil. The uses are also not identical. RRD palmolein-the fractionated derivative of palm oil with the solid steam infraction removed from palm oil-is a more acceptable and digestible food than palm oil. The fact that there are two different Indian Standards for palm oil and palmolein is evidence of the fact that the two are different products-and not one and the same thing- recognised as such in trade and industry. Otherwise, there would be no need for the Indian Standards Institution to establish two different Standards. It is also to be observed that the subject goods are described in the record as RBD palmolein and not as RBD palm oil. It is also seen that for Customs tariff purposes, palm oil and palmolein are considered as two separate substances ; they are listed separately in Customs Notification No. 42 dated 1-3-1979. Having regard to all these considerations, we are of the opinion that palmolein cannot be considered to be palm oil eligible for duty exemption in terms of Notification No. 150/64. We have gone through the Government's order-in-review reported in 1981 ELT 72 which examined the issue in depth and came to the same conclusion which we have arrived at. We also note that the same conclusion was arrived at by this Tribunal in its Order No. 232/83-C relied upon by the Departmental Representative.

10. The other grounds taken up in the memorandum of revision applications/appeals were not urged before us by the learned Counsel.

We shall, however, briefly refer to them. It is contended that since the process of conversion of palm oil into palmolein does not amount to "manufacture", the latter is not liable to excise duty undei Item 12-CET. This contention is misconceived for it has no application whatsoever to the levy of additional duty of customs on imported goods, though it may be relevant to determine the excisability of indigenous goods in given circumstances. The only relevant question is whether the imported goods fall under one or the other of the classes of the goods specified in the CET. The answer is yes- palmolein is, according to the appellants, palm oil. And, palm oil falls under Item 12-CET. Though we have not accepted this stand, we consider that palmolein is a vegetable non-essential oil falling under Item 12-CET, though not the same thing as palm oil. In this view, the question of classifying palmolein under Item 68-CET also does not arise.


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