TMI Blog2007 (10) TMI 92X X X X Extracts X X X X X X X X Extracts X X X X ..... al, they got themselves registered with the customs and imported crude palm oil at concessional rate. 2. Based upon intelligence that the said imported crude palm oil was not being used by the appellant for manufacture of industrial fatty acid i.e. the declared product but the same was being used for the purposes of edible products like refined oil/vegetable products, their factory was visited by DRI officers, who conducted various checks and verifications and scrutinized the records. Statements of various persons were also recorded. 3. As a result of the investigations made, appellant were issued a show cause notice dt.24.3.03 alleging that 84,35,816 MT of crude palm oil (industrial grade) imported by them at concessional rate of duty in terms of the Notification No.21/2002-Cus was not entitled to the benefit in as much as the same has been issued for the purposes other than for which exemption was availed by them. In other words, the Revenue alleged that the said imported crude palm oil has been used for manufacture of palm fatty acid distillate (hereinafter referred to as PFAD) which cannot be held to be industrial fatty acid for the manufacture of which they were not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (B) All oils, other than edible grade, having Free Fatty Acid (FFA) 20% or more falling under heading 1507, 1508, 1509, 1510, 1511, 1512, 1513, 1514 or 1515. 65 - - Conditions 5 of Annexure to the said notification is to the effect that if the importer follows the procedure set out in the Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 1996. There is no dispute that the above Condition 5 stands duly complied with by the appellant. 7. The manufacturing process adopted by the appellant is distillation process, which results in emergence of about 25% of palm fatty acid distillate (PFAD) and balance of about 75% as a refined palm oil. In terms of the above entries of Notification No.21/2002-Cus, dt.1.3.02, the crude palm oil (non-edible grade) is entitled to the benefit of the concessional rate of duty if the same is used for manufacture of, inter alia, industrial fatty acid. The Revenue's objection to the grant of the benefit of notification, as recorded by the Commissioner in his impugned order is two fold: (1) that the PFAD manufactured by M/s GAEL is not industrial fatty acid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... em from the appellant, was set to oil pre-treatment plant for improving the clarity and for removal of sediments and particles if any. The treated fatty acid was then set to fat splitting in fat splitting plant, unconverted Glyceroids present in palm fatty acid distillate were converted into free fatty acid (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 hydrogen reaction all the double and triple bonds were converted into single bond; the hydrogen required for hydrogen reaction was produced by steam reforming of natural gas; after hydrogenation reaction catalyst was removed by filtration in leaf 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly support the appellant's contention that PFAD is nothing but fatty acid. The said note expressly covers fatty acid distillate obtained from fat and oil and which has been subjected to vacuum distillation in presence of steam as part of the refining process. Shri Nankani also submits that they have been clearing the palm fatty acid distillate on payment of duty of excise under heading 38.23, which covers fatty acid and no objection was ever raised by the Revenue for classification of the said production under Chapter Heading 38.23. As such, he submits that when the duty of Central Excise on PFAD under Heading 38.23 was not disputed by the Revenue for the purposes of payment of Central Excise duty; it is not open to them to contend to the contrary that PFAD is not industrial fatty acid. It has also been contended before us that Notification does not refer to any particular method or manufacture of industrial fatty acid and the Revenue's objection to the use of method of distillation to support their case that industrial fatty acid was not manufactured by them or resultant PFAD is not industrial fatty acid, is neither proper nor important. Reliance has been placed upon the vario ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to manufacture PFAD, confirmed to standards of Prevention of Food Adulteration Rules, 1956. This aspect has been verified and confirmed by the jurisdictional authorities to the satisfaction of the DRI who investigated the present case. The reliance on the Test Reports of the Chemical Examiner, Visakhapatnam, Dr. Rao and the Chemical Examiner, Kandla, Shri Narendrakumar is totally misplaced and misconceived. The Test Report and technical opinion of Dr. Rao are self-contradictory. Dr. Rao's answers in the cross examination are evasive and Dr. Rao has avoided reference to the HSN. Mr. Narendrakumar admits in his cross examination that PFAD is also an IFA. It is, therefore, submitted that the reference to the evidence of two chemical examiners does not at all support the allegations contained in the Show Cause Notice or the findings in the impugned order. 10. After carefully considering the submissions made by both sides on the legal issue, it is seen that the Revenue's stand that PFAD cannot be considered as industrial fatty acid is mainly based upon the test report given by Shri Rao and Shri Narendra Kumar, Chemical examiners. We find that the said test report only decl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he has observed that for the purpose of interpreting notification No.21/2002, the proper test is trade parlance and normal meaning which a knowledgeable person would attach to the term and not necessarily what has been laid down in the HSN. We are afraid, we do not find ourselves in agreement with the above views of the Commissioner. Notification only specify "fatty acid". As such, for the purposes of finding out as to whether the PFAD is industrial fatty acid or not, the support from HSN has to be drawn. When HSN admittedly recognizes fatty acid distillate to be covered by Chapter 38, being fatty acid, there is no justifiable reason as to why the same should be excluded from the expression "industrial fatty acid" at the time of examining the applicability of the notification. The adjudicating authority has also observed that - "it is very clear that in general, raw material has to be saponified or hydrolysed to obtain industrial fatty acid. Mere refining is not enough. It is true that as a special case, the HSN goes to say that this heading also includes fatty acid distillate obtained from raw material which has been distillate. But this is a special and artificial explanat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not be curtailed by any process of reasoning above supposed intention of the Central Govt. underlying issuance of the said notification. It was further observed by the Hon'ble Court as under: "12…… It is also not possible to agree with the contention of Shri Bhat, learned Additional Solicitor General placing reliance on a decision of this Court in The Tata Oil Mills Co. Ltd. v. Collector of Central Excise [1989 (43) E.L.T. 183 (S.C.)] that the supposed object and purpose of exemption should also be kept in view. In paragraph 6 of the Report, Ranganathan, J. speaking for a two-Member Bench of this Court has observed that in trying to understand the language used by an exemption notification, one should keep in mind two important aspects : (a) the object and purposes of the exemption and (b) the nature of the actual process involved in the manufacture of the commodity in relation to which exemption was granted. It must be kept in view that the object and purpose of the exemption has to be culled out from the express language of the notification. If the express language of the notification does not indicate a contrary intention conveyed by the wide words employed by the not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Central Excise duty, the PFAD is correctly classifiable under Chapter 38, but for the purposes of grant of exemption notification, the same would not be covered by the sub-heading, on the face of it and in the light of the law as discussed in the above referred decision, would be contradictory. Similarly, Tribunal in the case of CCE Chennai Vs. Cheslind Textiles Ltd. 2007 (209) ELT 99 (Tri-Chennai) observed that it is trite law that the exemption notification should be strictly considered. Nothing can be added to the said notification nor anything can be deleted from it. No expression used in the notification can be varied or abridged so as to alter its meaning. Further, in case of CCE Pondichery Vs. Saravana Insulators Ltd. 2006 (199) ELT 551 (Tri-Chennai), it was that the meaning of an entry in the exemption notification is to be gathered from the plain language used therein. In the case of Steel Authority of India Ltd. Vs. Collector of Customs and Excise, Bolpur (W.B.), 1997 (91) ELT 529 (SC), it was held that the meaning of the word given in the exemption notification is to be gathered from the relevant tariff description and inclusive definition given in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only 25%, would make the appellant ineligible to the benefit of the notification. When we read the notification, we find that the same lays down that imported crude palm oil must be used for industrial fatty acid. It does not mean that yield of industrial fatty acid should be to the extent of 100%. Admittedly, the said crude palm oil has been used for the manufacture of industrial fatty acid. The Revenue's objection that such industrial fatty acid is only to the extent of 25% and as such the appellants would not be entitled to the benefit of the notification is not in accordance with the plain language implied in the notification. It is nowhere suggested in the notification about the percentage yield of industrial fatty acid. As we have already observed in the preceding paragraph that a notification has to be seen and interpreted on the basis of clear plain language used and no extra materials can be read into the same. In as much as no percentage yield stands mentioned in the notification, the Revenue's objection can not be sustained. It has been argued before us by the learned JCDR that crude palm oil (industrial grade) cannot be used for manufacture of refined vegetable ..... X X X X Extracts X X X X X X X X Extracts X X X X
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