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M/s Nikhil Refineries Pvt. Ltd. Versus CCE, C & ST, Visakhapatnam-II

2017 (9) TMI 1489 - CESTAT HYDERABAD

Classification of goods - Refined Palm oil, Refined Palm Stearin etc - whether classified under CETH 3823 1900 or under CETH 1511 9090? - Held that: - Since impugned Palm Stearin is Refined, Bleached and Deodorised (RBD) and sold for industrial use, it will then be classified under specific sub heading in 3823 11 12 - RBD Palm oil stearin when used as an industrial monocarboxolic fatty acid/acid oil, sold for industrial use, would then necessitate their classification under 3823 1112 - demand up .....

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e Appellant Sh. R. Narasimha Murthy, Superintendent (AR) for the Respondent ORDER [Order Per : Madhu Mohan Damodhar] 1. The facts of the case are that the appellant has a manufacturing unit for manufacture of Refined Palm oil, Refined Palm Stearin etc. and were availing exemption from payment of Central Excise Duty vide Notification No. 03/2006-CE, dated 01.03.2006. Appellants also cleared Palm Fatty Acids and Acid Oil on payment of duty. During the period September 2008 to March, 2009, appellan .....

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e classification under CETH 1511 9090. Alleging mis classification and evasion of Central Excise Duty, Department issued a Show Cause Notice dated 08.03.2012, which was adjudicated by original authority vide Order dated 30.10.2012, resulting in the following consequences: a) Ordering of classification of goods under 3823 1112 of CETA and demand of differential excise duty of ₹ 46,36,994/- with interest liability thereon; b) Imposition of penalty of ₹ 46,36,994/- under section 11-AC o .....

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. (ii) Tariff Heading 1511 covers crude as well as refined, bleached and deodorized (RBD) palm oil and its fractions as long as they are not chemically modified. Therefore, fractions of fats or oils obtained from fractionation, whereby chemical structure of fats or oils do not undergo any change are covered under Chapter 15. Tariff Heading 1511 cover fats and oils which are esters of glycerol with fatty acids and are not composed of free fatty acids. (iii) CETH 3823 covers industrial monocarboxy .....

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of fatty acids. (iv) Palm Stearin that emerges from fractionation of crude palm oil is composed primarily of triglyceride of stearic acid along with triglycerides of some other fatty acids such as palmitic acid. This stearin may be crude or refined. Since Chapter Heading 3823 seeks to cover fatty acids obtained chemically breaking down the esters (tryglycerides) of fatty acids the palm stearin covered thereunder though commercially called stearin is stearic acid only. (v) It is the Stearic Acid .....

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stearin. The Stearin clssified under Stearic Acid is a chemically modified product as explained in detail below, as against RBD Palm Stearin which is derivtive of the physical process, namely Fractionation without being chemically modified and is to be classified under Tariff 1511 9090. 4. On the other hand, on behalf of the Department, Ld. AR, Shri R. Narasimha Murty supports the impugned order. He further submits that chapter heading 3823 11 11 covers palm stearin and that there is a specific .....

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der CETH 1511 11 or as CETH 3823 11. 6.1 Revenue seeks to classify the goods as 3823 1112 on the reasoning that said entry specifically covers RBD Palm Stearin. On the other hand, appellant contends that Palm Stearin produced by them since not chemically modified, will merit classification only under CETH 1511. 6.2 To better understand this controversy, it would be useful to understand what exactly is RBD Palm Stearin. As per data from the website of Malaysian Palm Oil Board, from where bulk of .....

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ortening vanaspati etc. for deriving other products. The process flow chart as available on the website is reproduced below: 6.3 On the other hand, RBD palm stearin is a solid fraction obtained from the fractionation of RBD palm oil. In such fractionation process other than RBD palm stearin, fractions like RBD Palm Olein etc. also emerge. RBD palm stearin is used in shortening industry. It is also used in soap, candle and oil chemical industries. The flow chart giving the process showing the Pal .....

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t the product is not chemically processed. They further placed reliance on Board's circular No.81/2002 Cus, dated 03.12.2002 to contend that palm stearin would fall under chapter heading 1511. 6.5 In the written submissions filed by appellant, at the time of personal hearing before original adjudicating authority, appellants once again submitted that the product manufactured by them is 'RBD PALM STEARIN'. They have also mentioned that Bleaching is done by using activity bleaching cla .....

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ics etc. as an industrial chemical. 6.7 Further, from para 4.2 of the impugned order, we find that the lower appellate authority has, on the basis of the appeal record, noted that appellant is refining crude palm oil and as submitted by the appellant, they are obtaining RBD palmolein stearin after processing crude Palm oil into refined palm oil, from there it being processed in both Palmolein and Palm Stearin - a hardened fat with high melting point at room temperature. 6.8 Appellants have conte .....

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11 0 - Other Discernably, while there exist specific sub headings for RBD Palm Oil (1511 9010) and RBD palmolein (1511 9020), there is no separate and specific sub heading for RBD Palm Stearin in CETH 1511. Appellant argues that RBD Palm Stearin, being a fraction of crude Palm oil without chemical modifications, should merit classification under the residual sub heading Other (1511 9090). That argument, in our view, will not pass muster. Further the impugned goods are sold for industrial use as .....

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r specific sub heading in 3823 11 12. 6.10 Viewed in the light of the discussions above, we are of the considered opinion that RBD Palm oil stearin when used as an industrial monocarboxolic fatty acid/acid oil, sold for industrial use, would then necessitate their classification under 3823 1112. 6.11 We find that this very issue has been clarified by CBEC, taking note of the judgment of Hon ble Supreme Court in Jocil Limited [2011(263)E.L.T. 9 (S.C.), in their circular dated 15.12.2010 clarifyin .....

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