TMI Blog1980 (9) TMI 90X X X X Extracts X X X X X X X X Extracts X X X X ..... palmolein imported into India is correct in law. The reasoning of the Appellate Collector of Customs, Bombay was that the additional duty levied under the provisions of Section 3(1) of the Customs Tariff Act, 1975 ought to be equal to excise duty for the time being leviable on like articles if produced or manufactured in India. The Central Excise Tariff item 12 covers `V.N.E. Oils all sorts'. palmolein being a sort of V.N.E. Oil, the question arose whether palmolein would fall under item 12 of Central Excise Tariff. The importers contended that Palmolein and palm oil were one and the same thing, the former being the liquid fraction of the latter, and as such palmolein would be a' par with palm oil for availing of the benefit of exemption under Notification No. 150/64-C.E dated 19-9-1964, "hereunder palm oil was fully exempted from Central Excise duty. Though the Appellate Collector did not agree with the said contention of the importers viz. that palm oil and palmolein were the same sort of V.N.E. Oil yet he allowed the appeals on the ground that further processing of palm oil into palmolein could not be recognised as dutiable manufacturing activity falling within the purview of it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing to them, was nothing but the liquid fraction of palm oil. The main thrust of the importers' arguments was that palmolein was identical to palm oil although the Appellate Collector held it to be otherwise and in the review notice the finding of the Appellate Collector in this regard was not questioned. It is strange that despite this inherent conflict in the stand of the importers and the findings of the Appellate Collector, the importers have chosen inter alia to rely on the arguments of the Appellate Collector for opposing the present review proceedings. Be that as it may, since the above point has been agitated and is pertinent to the question of deciding the leviability of Palmolein to additional duty, the Government consider it fit to examine it in depth. 5. The importers were given an opportunity for making oral submissions before the Government of India on the 22nd and 23rd of May, 1980 and their oral submissions were followed by a detailed statement enclosing a number of exhibits from Ex. A to Ex. M. 6. Shri S.S. Ray, Senior Advocate, appeared and pleaded on behalf of the importers before the Government. Shri Ray contended in the first instance, that palmolein is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess that palmolein could not be considered as having a distinctive character or use vis-a-vis palm oil. The judgments referred to by him are as follows : 1. M/s. Tungabhadra Industries Ltd. v The Commercial Tax Office, Kurnool (1961 SC 413). 2. State of Gujarat v. Sakharwala Bros. (1967, 19 S.T.C. 24 SC), 3. State of Madhya Bharat v. Hiralal Ji (AIR 1966 SC 1546), 4. Pyrelal Malhotra v. Joint Commercial Tax Officer (1970, 26 STC 416), 5. Kapildeoram Baijnath Prasad v. J.K. Das (1954, 5 STC 365), 6. The State of Andhra Pradesh v. Durga Hardware Stores (1973, 32 STC 322, 7. Commissioner of Sales Tax, Lucknow v. D.S. Bist and Sons (AIR 1980 SC 169), 8. Deputy Commissioner, Sales Tax (Law), Board of Revenue (Taxes), Ernakulam v. Pio Food Packers [1980 E.L.T. 343 (SC)], 9. Vijay Textiles v. Union of India [1979 E.L.T. (J 181)], 10. Union of India v. Delhi Cloth General Mills Ltd. - 1977 E.L.T. (J 99) = (AIR 1963 SC 791), 11. Garware Nylons Ltd. v. Union of India Others [1980 E.L.T. 249 (Bom.)], 12. McNicol Another v. Pinch [1960 (2) Indian Law Reports K.B. 352]. Government observe that all these judgments have dealt with the concept of `manufacture' in one way or the other with re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tor for the purpose of classification as to under what head duty would be leviable". The concept of `manufacture' as set out in the judgments of courts as referred to by importers was relevant only where different stages of production are material for determining whether a product manufactured in India passed from one excisable stage to another excisable stage. Since Section 3(1) of the C.T.A. 75 does not refer to the concept of `manufacture' under the Central Excise Act, this concept was not relevant in the present case. In this connection it may be pertinent to recall the decision of Gujarat High Court in the matter of Vijay Textiles v. Union of India [1979 E.L.T. (J 181) referred to by the senior Advocate. In para 11 and para 15 of the said judgment the Hon'ble High Court made a clear distinction between the Sales Tax laws and Central Excise laws in so far as the taxable event is concerned. A number of sales tax cases dealing with the concept of `manufacture' were also considered by the Hon'ble High Court of Gujarat in the aforesaid judgment. The Government are, therefore, of the view that the ratio of these sales tax cases cannot be applied to the present case inasmuch as the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olein is not being produced in the country but it is expected that palmolein produced in the country in future would be covered by this standard". The two different standards laid down by ISI for palm oil and palmolein leave no room for doubt that palm oil and palmolein are two distinct products having distinct name and character. As regards their use also, it is observed, and is also admitted by the importers in para 1.13 of their statement, that palmolein is more acceptable from the view point of appearance end is more digestible for human beings for reason of removal of the solid fraction which is difficult to digest. As such, from the view points of suitability and utility, the use of these two oils cannot be stated to be identical. 11. From the above analysis, it follows that palmolein does not only have a distinctive name but also distinctive character and use vis-a-vis palm oil. In this context, reference may be made to the Supreme Court's decision in Union of India v. Delhi Cloth and General Mills Ltd. [vide 1977 E.L.T. (J 99) = AIR 1963 SC 791] wherein the Court held that both raw and refined V.N.E. oil would fall under item 12 C.E.T. because the said item covers all sor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mention in the aforesaid exemption notification. As such, even if it is assumed that palmolein is only one sort of palm oil, the same would not be covered by the said notification so long as it does not go under the name, description or label of palm oil. The argument is however not at all valid because Government do not agree with the very contention that palmolein is only one sort of palm oil. The process of fractionation which is carried out with the aid of power is a difficult and complex process and the chemical properties of these two products vary from each other. 12. The Government observe that the importers in order to build their case relied upon some certificates from the trade to the effect that palmolein is nothing but a variety of palm oil. This is quite different from saying that the terms palm oil and palmolein are synonymous and as has already been pointed out in the preceding paragraph, even if it is assumed that palmolein is nothing but a sort or variety of palm oil, the same would not be covered by the notification which exempts only palm oil and not all sorts of palm oil. The very fact that the ISI standards in respect of palm oil and palmolein vary and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mbay High Court's observations in the matter of M/s. Duke Sons Ltd. v. G.T. Kundnani, Superintendent, Central Excise others decided on 11th October, 1976. The Hon'ble High Court observed that an effort to interpret the expressions in the Excise Act or notifications issued thereunder with reference to a statute (Import Control Order) which is not pari materia cannot be sustained. In this case also, the Senior Advocate is trying to interpret the term `palm oil' used in the notification No. 150/64-C.E., dated 19-9-1964 with reference to the Import Trade Control Policy book (and appendix) which is not pari materia and, therefore, his effort in this regard is legally not sustainable. Even assuming that such reference to the import Control Policy book was apt and valid, one is not led to the conclusion that the expression `palm oil' in the notification in question covers palmolein. The expression in the Import Control Order No. 32/78, dated 2-12-1978 and in Appendix 8 of the ITC Policy A.M. 79 that are relied upon by the learned Senior Advocate are "palm oil (all types including palmolein)" and "palm oil, all types, excluding palmolein", respectively. Even if it is admitted that Palmolei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ods of a given material or substance shall be taken to include a reference to goods consisting wholly or partly of such material or substance. According to him this would only mean and suggest in the present context that any reference to palmolein made of palm oil shall be taken to include a reference to palm oil consisting wholly or partly of palm oil. As palmolein is made entirely from palm oil, it should be classified under heading 15.07(3) of the C.T.A., 1975. He further pleaded that Rule 4 which provides that goods not falling within any heading of the Schedule shall be classified under heading appropriate to the goods to which they are most alike, would also support his contention that palmolein should be classified under heading 15.07 (3). The Government have carefully examined the above contention of the senior Advocate. In the first instance, the Government do not agree with the proposition that the class of the imported articles has to be determined under the Customs Tariff for the purpose of levying additional duty which is equal to Central Excise duty. The Government are of the view that for the purpose of levying additional duty on the imported goods the goods ought to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aterials or substances. Nor would it be correct to say that palmolein is made of palm oil. As a matter of fact, palmolein consists of the olein fraction of palm oil much of the stearin portion having been removed from it by fractionation. In any case, the First Schedule to the C.T.A., 1975 does not expressly refer to palmolein and as such Rule 2(b) does not help the importers in any way. The above interpretation of Rule 2(b) would find support in the commentary on the Rules for interpretation as given in the C.C.C.N. (Explanatory Notes, Vol. I) As a matter of fact, palmolein can be classified under heading 15.07 (1) which covers fixed vegetable oils other then soyabean oil and palm oil, with reference to Rule 1 of the Rules for the Interpretation. According to the said rule classification shall be determined according to the terms of the heading and sub-heading. palmolein like all other fixed vegetable oils with the exception of soyabean oil and palm oil, such as groundnut oil, palm kernel oil, rape-seed oil, sun-flower oil etc., should be classified under sub-heading (1) of heading 15.07, in accordance with the terms of the said sub-heading. As such, reference to rule 4 is neither ..... X X X X Extracts X X X X X X X X Extracts X X X X
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