Bhaskar Bhattacharya, ACJ (CAV)
1. All these Special Civil Applications were heard together as the point involved in all these writ-applications are of similar nature. We, however, propose to narrate the fact from Special Civil Application No. 1051 of 2012 filed by Cargill India Private Ltd. By this writ-application, the writ-petitioner, an importer, has prayed for the following reliefs;
(a) Admit the Petition and call for the records and proceedings of this case.
(b) A Writ of and/or in the nature of Mandamus directing and commanding the Respondents, each of them, their subordinates and officers to act in accordance with law without discrimination and to allow the Petitioner to process the imported consignment of Crude Palm Oil (Edible Grade) under Bill of Entry Nos. 5580614 dated 27-12-2011 to conform to the standards laid down under Food Safety and Standards Act, 2006 and the applicable Regulations and upon such processing to permit the clearance thereof in such time and manner as may be permitted;
(c) Injunction restraining the Respondents and each of their officers and subordinates from causing any delay or further delays in allowing the Petitioner to process the imported consignment under Bill of Entry No. 5580614, dated 27-12-2011 to conform to the standards laid down under the Food Safety and Standards Act, 2006 and the applicable Regulations and upon such processing in clearance thereof any further in any manner whatsoever;
(d) Ad interim order in terms of prayer (b) and (c) above;
(e) Costs of and incidental to this application be paid to the Petitioners by the Respondents;
(f) Allow this Petition, directing the Respondent No. 1 to 4 to lift the detention order and give consequential relief.
(g) Award costs.
(h) Pass such further orders and grant relief and/or direction or directions be given as this Hon''ble Court may be deemed fit, just and proper in the interest of justice.
2. The case made out by the petitioner may be summed up thus:
2.1. The Petitioner has various manufacturing units of refined edible oils under the Brand Names of ''Nature fresh'', ''Gemini'', ''Sweekar'', etc. by refining crude edible oils including crude palm oil (edible grade). One of such units of the Petitioner is located at Survey No. 415, National Highway 8-A, P.O. Bhimasar, Taluka-Anjar, Dist. Kutch, Gujarat. The refined oils being manufactured by the Petitioner out of such crude edible oils conform to the specifications prescribed under the provisions of the Food Safety and Standards Act, 2006 and the applicable Regulations.
2.2. The manufacturing unit of the Petitioner located at Kutch is registered with the Central Excise Authorities bearing Central Excise Registration Number AAACC3269JXM006. Further, it is also registered under Customs (Import of Goods at Concessional Rate of Duty for the Manufacture of Excisable Goods) Rules, 1996 bearing Registration Number GIM/CUS/CIPL-09/08-09, dated 30-12-2008 and has been following the procedure laid down under the said Rules for import of Crude Palm Oil. For the consignment which is the subject matter of dispute, the Petitioner had furnished a Bond in November 2011 under the said Rules.
2.3. The manufacturing unit of the Petitioner is capable of reducing the Free Fatty Acid (''FFA'') of the Crude Palm oil from up to 15% to less than 0.25% by refining the same.
2.4. To carry out the above operations, the Petitioner has been importing crude palm oil (edible grade) from foreign suppliers through Kandla port. For the said purpose the Petitioner is using their IEC Code No. 0596044330.
2.5. The Petitioner has been classifying the goods under CTH 1511 11 00 and claiming the benefit of concessional rate of duty from basic customs duty under Notification 21/2002-Cus., dated 1-3-2002 at Serial No. 30.
2.6. In the usual course of its business, the Petitioner recently, in the month of December 2011, imported 17,049.895 Metric tons (MT) of crude palm oil (edible grade) at Kandla Port from Port Dumai in Indonesia through vessel MT Horizon Voy No. TCV 09/11. The petitioner specifically placed an order for premium quality crude palm oil at higher price. It is well understood that the price of the crude palm oil rises with lower levels of acid value. This is because during the process of refining higher acid value results in higher wastage.
2.7. Out of the total quantity imported by the Petitioner, 15,049.895 MTs was part of one parcel and was stored in Wings 2, 4 and 6 of the vessel in storage tank nos. 2P, 2S, 4P, 4S, 6P and 6S respectively. The said cargo, at the time of loading, had a Free Fatty Acid (''FFA'') content of 4,07% which corresponds to Acid Value of 8.91% [Acid value = Percent fatty acid (as palmitic) x 2.19].
2.8. The balance 2,000 MTs was part of another parcel weighing 15499.472 MTs also loaded at the same port on the same vessel in Wings 1, 3 and 5 in storage tank nos. IP, IS, 3P, 3S, 5P and 5S respectively. The FFA content of the said parcel was 4.74%, which corresponds to Acid Value of 10.38%.
2.9. The vessel arrived at Kandla Port on 25-12-2011 and discharged the cargo in the shore tanks belonging to M/s. Dhara Vegetable & Foods Co. and M/s. Agencies & Cargo Care Ltd. The first parcel of 15049.895 MTs belonging to Petitioner was discharged in Shore Tank Nos. 306, 310, 311 of Dhara Vegetable & Foods Co. The balance cargo of 2000 MTs from the second parcel was discharged in Shore Tank No. ACC-26 of Agencies & Cargo Care Ltd.
2.10 The cargo was once again tested at Discharge Port by an independent surveyor by drawing samples separately from each of the two parcels on the vessel. The FFA content of parcel of 15049.895 MTs was found to be 4.13% at discharge Port (Equivalent Acid Value being 9.04%) and the FFA content of balance 2000 MTs which was part of the second parcel of 15499.472 MTs was found to be 5.03% (Equivalent Acid Value being 11.02%).
2.11 On learning about the arrival of the abovesaid consignments at the port of Kandla, the Petitioner filed Bill of Entry No. 5580614, dated 27-12-2011 for clearing the entire cargo of 17049.895 MTs u/s 46 of the Customs Act 1962 before the proper officer for clearance of goods for home consumption as prescribed u/s 47 of the Customs Act. The description of the goods as per Bill of Entry(s) is as follows-
Tariff Item No. 1511 10 00 Crude Palm Oil (Edible Grade) in Bulk
2.12 The Customs and the Public Health Officer (PHO) drew samples from the vessel and thereafter the Customs assessed the goods vide Bill of Entry No. 5580614, dated 27-12-2011 and Out of Charge (''OOC'') order was given for clearing the same by allowing exemption from Customs duty vide Customs Notification No. 21/2002-Cus., dated 1-3-2002. Without receiving a positive report from the Port Health Officer, Customs would not have given an Out of Charge to the cargo imported by the Petitioner.
2.13 However, the Petitioner on 29-12-2011 came to know that the Customs had passed a Detention Order bearing F. No. 5/10-06/Gr. 1/2011-12, dated 29-12-2011 ordering stoppage of deliveries of imported crude palm oil on the ground that the acid value of the goods was above 10, which is beyond the prescribed limits and thus, the goods are not eligible for exemption/concessional rate of duty.
2.14 The Petitioner, vide its letter dated 6-1-2012, submitted to the Customs:
(a) that the said goods were of acid value less than 10. In support of the same, the Petitioner provided the chemical analysis report of the goods by an Independent Surveyor, Dr. Amin Controller Pvt. Ltd. conducted at the time of discharge and the Chemical Analysis Report issued by the Petitioner''s Plant Quality Lab, both of which showed that the acid value of the goods were below 10.
(b) that they were given to understand that the Port Health Officer (''PHO'') and the Customs had drawn samples of the entire consignment on board of the Ship and that there were multiple receivers/importers of the goods on the vessel. The Petitioners submitted that in such a case, the said chemical analysis report should not be relied upon and that the PHO and the Customs must draw exclusive samples of the goods imported by the Petitioner to determine the acid value as it is possible that the crude palm oil imported by other importers may have had acid value greater than 10 causing the acid value of the entire consignment on board the ship to exceed the acid value of 10.
(c) that they had reason to believe that the chemical analysis conducted by the PHO also confirms to the fact that the cargo imported by them is eligible for exemption.
(d) that Circular bearing F. No. 528/27/97-Cus. (TU) (Circular No. 29/97) dated 31-7-1997 issued by the Ministry of Finance, Department of Revenue, (Tariff Unit), New Delhi, clarified that the term ''vegetable oil of edible grade'' as
...the terms "vegetable oils of edible grade" will cover vegetable oils which are fit for human consumption after further processing. The benefit of duty exemption is admissible so long as the oils imported is used for edible purposes, even after refining....
(e) that the decision of the Hon''ble High Court of Calcutta in the case of
2.15 The Petitioner did not receive any response to their letter dated 6-1-2012. and therefore, issued another letter, on 12-1-2012, requesting the Respondent No. 4 to draw separate samples for the purpose of any chemical analysis to determine the acid value of the imported goods. The Petitioner also provided the chemical analysis report of an independent surveyor, M/s. Inspectorate (Singapore) Pvt. Ltd., a Bureau Veritas Group Company, issued at the Load Port, which showed that the imported goods had an FFA of 4.07 and an Acid Value of 8.19 at the time of loading. Further, the discharge report at the time of the discharge of the goods at Kandla by the independent surveyor showed that FFA content was only 4.13. The Petitioner also indicated in the letter that a total quantity of 30,549.367 M.T. of crude palm oil was imported on board the ship containing the subject goods and the Petitioner''s goods were stored in Tank No. 2P, 2S, 4P, 4S, 6P and 6S, which are now stored in tank No. 306, 310 and 311 of Dhara Vegetable Oils and Foods Company and tank No. ACC-26 of Agencies and Cargo Care Ltd.
2.16 The Petitioner, on 12-1-2012, vide a separate letter also requested for fresh drawal of samples for testing in order for the Detention Order to be lifted as the business was suffering because of delay in clearance.
2.17 The Petitioner, on 12-1-2012, was informed by the Respondent that chemical analysis of the subject goods by the CRCL, Kandla and the Central Foods Laboratory, Pune found that the goods contained acid value above 10. Accordingly, the Respondent alleged that the Petitioner had mis-declared the imported goods with intention to evade customs duty and a show cause notice was to be issued. The Respondent also informed the Petitioner that if it wished to be heard in person before issuance of show cause notice, it might appear on 13-1-2012 at 1500 hours.
2.18 The Petitioner, vide letter dated 17-1-2012, 18-1-2012 and 20-1-2012, again requested the Respondent Nos. 3 and 4 to draw samples from the shore tanks for the purpose of testing and drew attention to the chemical analysis report at the load and discharge port in support of their submission that the acid value of the goods were less than 10 at the time of import.
2.19 The Petitioner did not receive any response to their submissions and letters and the subject goods of the Petitioner remained under detention.
2.20 The said goods have been imported following the procedures laid down by the Customs (Import of Goods at Concessional Rate of Duty for Manufacture) Rules, 1996 and the petitioner has provided a bond to the Respondent stating that the said goods are to be used for the manufacture of edible palm oil in India. Thus, the intention of the Petitioner is not to divert the goods away from its intended purpose and use it for industrial use.
2.21 The object and purpose of Laws relating to "Food" is that goods should not be permitted to come in the mainstream unless those are fit for human consumption and the same should not adversely affect the environment and health on consumption. The statutory provisions concerning "Food" have also been made under the Customs Act with common intention to prevent import of adulterated food into India. Hence, both the said Laws call for harmonious construction.
2.22 It is relevant that, the standard of "edible oils" is under the Food Safety and Standards (Food Products Standards and Food Additives) Regulations, 2011 and the respective standards of different edible oils are prescribed under the Heading 2.2.1(1) to 2.2.1(24) there under. In so far as "Palm Oil" is concerned, the standard thereof is under Regulation 2.2.1(19) wherein Palm Oil has been defined as follows:
19. Palm oil means the oil obtained from fleshy mesocarp of fruits of the oil palm (Elaeis Guinensis) tree by the method of expression or solvent extraction. It shall be clear, free from rancidity, suspended or other foreign matter, separated water, added colouring and flavouring substances or mineral oil. It shall conform to the following standards, namely:--
Butyro-refractometer reading at 50�C 35.5-44.0
Or
Refractive Index at 50�C 1.4491-1.4552
Melting point (capillary slip method) Not more than 37�C
Iodine value (Wij''s method) 45-56
Saponification value 195-205
Unsaponifiable matter Not more than 1.2 per cent
Acid value Not more than 10.0
Indigenously produced raw Palm Oil obtained by method of expression may be supplied for human consumption as such provided acid value is not more than 6.0
But palm oil imported into the country or produced by solvent extraction shall be refined before it is supplied for human consumption and it shall conform to the standards laid down under regulation 2.2.1 (16). Addition-ally, it shall have Flash Point (Pensky-Marten closed method)-Not less than 250�C Test for argemone oil shall be negative. However, it may contain food additives permitted in these Regulations and Appendices. The oil so refined shall not contain Hexane more than 5.00 pm.
2.23 The said Heading 2.2.1(19) has two parts, the first part speaks of "Palm Oil" which is edible oil and the standard thereof is laid down. The other part is imported Palm Oil. It is thus clearly apparent that, the legislature has specifically excluded the imported palm oil from the 1st portion of Regulation 2.2.1(19) consciously, but in the proviso thereto, provided intentionally that the Palm Oil imported into the Country shall be refined before it is supplied for human consumption and the same shall conform to the standards laid down under Regulation 2.2.1(16).
2.24 The standard under Regulation 2.2.1 (16) is of Refined Vegetable Oil i.e. refined, bleached and deodorized and the conditions stipulated thereunder are-
(i) The name of vegetable oil from which the refined oil has been manufactured has to be clearly shown on the label of the container, and
(ii) The Standards prescribed under the Food Safety and Standards (Food Products Standards and Food Additives) Regulations, 2011 for the specified edible oils shall also apply except for Acid Value which shall be less than 0.5%.
2.25 Accordingly, in terms of the said provisions under Regulation 2.2.1(16), it is categorically and ex facie evident that the standards prescribed under the said rules i.e. under Regulation 2.2.1 and sub-headings 2.2.1(1) to 2.2.1(24) are for "edible oils" and that after manufacture of edible oil the requirement of packaging and labelling are also mandatory. In other words, the overall reading of Regulation 2.2.1(19) will clearly show that the imported Palm Oil has necessarily to be refined to conform to the Standards under Regulation 2.2.1(16) and 2.2.1(19) except with regard to Acid Value to be less than 0.5% before the same can be sold for human consumption.
2.26 It is relevant that insofar as the Customs Law is concerned, the Government has been conscious of the provisions of the erstwhile Prevention Food Adulteration Act, 1954 and the Prevention of Food Adulteration Rules, 1955 repealed and replaced by the Food Safety and Standards Act, 2006 and the Food Safety and Standards (Food Products Standards and Food Additives) Regulations, 2011 respectively and the Government has put the Supplementary Note-1 under Chapter 15 of the Customs Tariff Act, 1975 to the following effect:-
In this Chapter, "edible grade", in respect of goods (i.e. edible oils) specified in Appendix B to the Prevention of Food Adulteration Act, 1955, means the Standard of quality specified for such goods in that Appendix.
2.27 Customs Laws (Notification 21/2002-Cus., dated 1st March 2002 as amended) provides that import of Crude Palm Oil having Acid Value of 4 and above would be permitted to import for refining the same and the Food Safety and Standards (Food Products Standards and Food Additives) Regulations, 2011 provides that the refined oil manufactured out of imported Palm Oil has to meet the Standard of edible oil prescribed under Regulation 2.2.1(16) and 2.2.1(19) except in respect of Acid value which should not be more than 0.5.
2.28 It is pertinent to state that it is unlikely that the Government would define "Crude Palm Oil (Edible Grade) and prescribe the Standard thereof under the Standards (Food Products Standards and Food Additives) Regulations, 2011 or any other law relating to Food in force for the time being. The Government, while issuing and/or amending Notification No. 21/2002 could have adopted the definition as contained under the then prevailing Prevention of Food Adulteration Rules but instead has given a specific definition. The Government has consciously prescribed specific definition of Crude Palm Oil (Edible Grade) under Notification No. 21/2002 (amended) to carve out the same from the definition of Palm Oil under the then prevailing 17.19 of PFA Rules.
2.29 The inconsistency between the Customs Tariff Act and the Food Safety and Standards Act, 2006 and the Food Safety and Standards (Food Products Standards and Food Additives) Regulations, 2011 cannot be allowed to persist by the Government. The harmonious reading of the said two sets of laws/provisions will show that Government has permitted import of Crude Palm Oil (Edible Grade) having Acid Value 4 and above without any limit on higher side knowing fully well that Imported Palm Oil could not be sold in India for home consumption unless refined and before it conforms to the standard under Regulation 2.2.1(16) of the Food Safety and Standards (Food Products Standards and Food Additives) Regulations, 2011. Accordingly, the clearance of the subject consignment imported by the Petitioner shall not result into the entry of any adulterated food in the mainstream.
2.30 While being conscious and aware of the definition and standard of Palm oil prescribed under the Food Safety and Standards Act, 2006 and the Food Safety and Standards (Food Products Standards and Food Additives) Regulations, 2011 the Government by Notification has permitted import of Crude Palm Oil (Edible Grade) with Acid Value 4 and above with no limit on higher side.
2.31 Under the Food Safety and Standards Act, 2006 and the Food Safety and Standards (Food Products Standards and Food Additives) Regulations, 2011 the Government has intentionally neither defined the "Crude Palm Oil (Edible Grade)" nor prescribed any standard thereof as it is known to the Government that Crude Palm Oil having Acid Value 4 and above is not edible oil as such.
2.32 In the present case it is not the case of the Respondents that the Crude Palm Oil (Edible Grade) imported by the Petitioner is edible as such or the same is meant for sale before refining. It is also not in dispute that in the unit of the Petitioner the said imported Crude Palm Oil would be made edible oil of the Standard 2.2.1(16) with acid value not more than 0.5. It is pertinent to mention that the Acid value is the measure of "free fatty acid" in crude oil and by refining free fatty acid can be removed by use of alkali from 30% to 0.5 or less than 0.5 as will be evident from Board Circular 29/97, dated 31st July, 1997. The manufacturing unit of the Petitioner is capable of bringing down the Acid value from 15% to less than 0.5% as will be evident from the Certificate of Plant manufacturer.
2.33 There is no dispute that the imported Crude Oil is having the requisite Acid value more than 4 and the same conforms to the Standard prescribed under Notification 21/2002-Cus., dated 1st March, 2002 (as amended) in all respects. Accordingly, it is apparent that the import thereof has been consciously permitted by Customs Laws, keeping in view that the provisions of the Food Safety and Standards Act, 2006 and the Food Safety and Standards (Food Products Standards and Food Additives) Regulations, 2011 are meant for edible oil.
2.34 No prejudice will be caused in clearance of the Petitioner''s consignment by the Respondents inasmuch as on refining if the same is found not conforming to the standard prescribed under 2.2.1(16)/2.2.1(19) the same shall become prohibited goods in terms of Section 2(33) of the Customs Act, 1962 and be liable to confiscation. In such an event, the Petitioner will suffer huge loss on account of costs, duty, penalty and interest.
2.35 It is well settled that "consumption" in fiscal law need not be confined to such a narrow meaning. It has a wider meaning in which any sort of utilization of the commodity would as well amount to consumption of the article, albeit that article retaining its identity even after its use. In the context in which the expression "home consumption" is used in Section 46 of the Customs Act, it does not warrant a construction that the commodity should have been completely used up. Even putting the commodity to any type of utility within the territory of India will tantamount to "home consumption". Thus, since the intention of the Petitioner is to use the crude palm oil as refined vegetable oil after further refining the same, by no stretch of imagination can the declaration in the bill of entry for home consumption be alleged to reflect any wrong declaration.
2.36 On the face of the declaration that the same was crude palm oil intended to be converted into edible grade and that as it then stood, it cannot be construed or legitimately contended to conform to the standard of edible vegetable oil.
2.37 As appearing from Food Safety and Standards (Food Products Standards and Food Additives) Regulations, 2011, the importation of crude palm oil is not prohibited but palm oil imported into the country or produced by solvent extraction shall be refined before it is supplied for human consumption and it shall conform to the standards laid down under Regulation 2.2.1(16). Additionally, it shall have Flash Point (Penske-Marten closed method)-Not less than 250�C and the test for argemone oil shall be negative.
2.38 The Food Safety and Standards (Food Products Standards and Food Additives) Regulations, 2011 quoted hereinabove permits import of palm oil having more than 0.5% acid contents but puts restriction for further purification if intended to be used as vegetable edible oil, an item of food within the meaning of the Act of 2006.
2.39 It is relevant that the definition of food contained in Section 3(j) of the Act of 2006, the declaration in the bill of entry did not claim it to be a food within the meaning of the said Act i.e.
3.(j) "food" means any substance, whether processed, partially processed or unprocessed, which is intended for human consumption and includes primary food to the extent defined in Clause (zk), genetically modified or engineered food or food containing such ingredients, infant food, packaged drinking water, alcoholic drink, chewing gum, and any substance, including water used into the food during its manufacture, preparation or treatment but does not include any animal feed, live animals unless they are prepared or processed for placing on the market for human consumption, plants prior to harvesting, drugs and medicinal products, cosmetics, narcotic or psychotropic substances:
Provided that the Central Government may declare, by notification in the Official Gazette, any other article as food for the purposes of this Act having regards to its use, nature, substance or quality;
It is, therefore, apparent that unless the item is intended to be used for human consumption the same at any rate cannot come within the definition of the ''food''.
2.40 Since the consignment has been lying in the shore storage tanks for over one month there is a possibility that after the lapse of some days, the acid contents may increase further. Even if the acid contents is found to be slightly more than 10% which was the maximum acid contents declared in the bill of entry, for that reason the duty may vary but the goods will not become a prohibited goods because there is even no bar of importing crude palm oil having more than 10% acid contents if the same is not intended to be used for human consumption without further purification.
2.41 If the imported goods is used as food without further processing after removing the same to the custody of the Petitioner, the provisions contained in the Act of 2006 would be applicable by the appropriate authority under the said Act in accordance therewith but the Respondents will have nothing to do unless the importer i.e. the Petitioner has declared the item as one intended for immediate use for human consumption in the same form and the same is on examination found to be not in conformity with the guidelines given in the Act of 2006.
2.42 Such an arbitrary attitude of the Respondents has compelled the Petitioner to approach this High Court to intervene for directions to the respondents for lifting the detention order in light of the chemical analysis reports and information provided by the Petitioner as well as on the basis of the report of Port Health Officer (''PHO'').
2.43 The Petitioner has legally and under bona fide belief, followed the provisions and the notifications in a sincere, just and fair manner and all the disclosures were made as required under the law while bills of entry u/s 46 of the Act were filed.
3. This application has been opposed by the Revenue by filing affidavit-in-reply and the defence taken by the Revenue may be summed up thus:
3.1. Self Assessment in Customs has been implemented w.e.f. 8-4-2011 vide Finance Act, 2011 by suitable changes to Sections 17, 18, 46 and 50 of the Customs Act, 1962. Under the Self Assessment Scheme, importers/exporters are required to correctly declare value, classification, description of goods, exemption notifications etc. Assessment of imported goods are done on the basis of declaration made on the statutory documents under the Self-Assessment Scheme and such goods are not subjected to any checking/examination. Presently at Kandla more than 50% of imported goods are assessed under the Self-Assessment Scheme without such checking/examination. Since the Government has reposed considerable faith in the importers under the said Scheme, the importer will be liable to face the legal consequences under the Customs Act for any mis-declaration in any material particular in such documents. Therefore, making of a true and proper declaration in documents is the prime responsibility of the importer under the self-assessment scheme.
3.2. Brief facts of the case according to the respondents:
(a) The vessel MT Horizon Voy. No. TCV 09/11 carrying about 30,000 MTs of goods declared as "Crude Palm Oil of Edible Grade," arrived at Kandla Port on 25-12-2011. The shipping agent concerned filed Import General Manifest, declaring therein that the goods carried in the vessel is Crude Palm Oil of Edible Grade. It may be mentioned that IGM and copies of the Bills of Lading filed along with the IGM indicate that the supplier is M/s. Cargill International Trading Pte Ltd., Singapore and the vessel carrying the said goods was taken on Charter by M/s. Cargill Ocean Transportation (Singapore) Pte Ltd., both of the same group. The entire quantity of 30,000 MTs was imported by four persons, viz., (i) M/s. Cargill India Pvt. Ltd., (17050 MTs), (ii) M/s. Kanpur Edibles Pvt. Ltd., (1999.472 MTs), (iii) M/s. JVL Agro Industries Ltd., (7500 MTs) and (iv) M/s. India Glycols Ltd., (4000 MTs). The Custom House Agent (persons licensed under the provisions of the Customs Act, 1962 for clearance of imported goods/export goods on behalf of importers/exporters at Custom Houses) for the entire quantity of 30,000 MTs was also only one person i.e. M/s. Narendra Forwarders Pvt. Ltd.
(b) On arrival of the vessel at Kandla Port, the customs officers as well as the Port Health Officer boarded the vessel and drew samples from each of the ship''s tanks in presence of the Custom House Agents appointed by the aforesaid importers. Since the goods are Edible Grade, clearance is to be allowed only after testing for determining whether the same conform to the standards laid down for edible grade goods under the Prevention of Food Adulteration Act and Rules. At the time of taking samples, neither the importers nor their Custom House agents informed that the Crude Palm Oil on the ship was of two types. Further, since similar declarations had been filed for both types of Crude Oil in the IGM, one composite sample was taken from the ship in the presence of the CHA.
(c) The local Port Health Officer who is authorized to test the samples for the purposes of the aforesaid Act/Rules, issued test report which indicated that the acid value of the sample was less than 10. Some importers thereafter filed bills of entry claiming exemption from Customs duty under Notification No. 21/2002-Customs claiming that the goods being imported was of edible grade. The goods were accordingly permitted assessment at concessional duties on the basis of declaration of the importers and the test report of the port health officer.
(d) In the meanwhile, intelligence was received that the acid value of the consignments was more than 10 and, therefore, the goods were not entitled to exemption but chargeable to customs duty. Therefore, samples of the goods were got further tested at the Central Revenue Control Laboratory, Government of India, Custom House, Kandla, which reported that the acid value of the consignment was 11. The Port Health Officer, Kandla was also requested to forward the duplicate samples drawn from the consignment to the appellate laboratory, i.e., the Central Food Laboratory at Pune for further test, which confirmed that the PHO, Kandla''s report was wrong and the acid value of the goods were 10.56 (i.e., more than 10). In view of these categorical findings from two statutory laboratories (CRCL, Kandla and Central Food Laboratory, Pune), the goods appeared to be chargeable to 100% Customs duty. In this case the duty liability is approximately Rs. 66 crore and the same were placed under detention.
(e) Crude Palm Oil falls under Chapter 15 of the First Schedule to the Customs Tariff Act, 1975. Supplementary Note 1 of Chapter 15 states that:
Edible Grade" in respect of goods (i.e., edible oil) specified in Appendix B of the Prevention of Food Adulteration Rules, 1955 means the standard of quality specified for such goods in that Appendix.
(f) Appendix B of the Prevention of Food Adulteration Rules, 1995 (A.17.19) reads as under:
A.17.19-Palm oil means the oil obtained from fleshy mesocarp of fruits of the oil palm (Elaeis Guineensis) tree by the method of expression or solvent extraction. It shall be clear, free from rancidity, suspended or other foreign matter, separated water, added colouring or flavouring substances or mineral oil.
It shall conform to the following standards, namely:-
(a) Butypro-refractometer reading at 50�C 35.5-44.0
OR
Refractive Index at 50�C 1.4491-1.4552
(b) Melting point (capillary slip method) not more than 37�C
(c) Iodine value (Wijs method) 45-46
(d) Sapanification value 195-205
(e) Unsapanifiable matter not more than 1.2%
(f) Acid value not more than 10.0
(g) Thus, a combined reading of Appendix B of the Prevention of Food Adulteration Rules and Supplementary Note 1 of Chapter 15 of the Customs Tariff indicates that Palm Oil of Edible Grade should have Acid Value less than 10.
(h) Crude Palm Oil attracts Tariff Rate of Customs duty @ 100% Crude Palm Oil of edible grade, if imported for actual use by edible oil refiners, attracts Nil Customs duty vide S. No. 30-II(B) of Notification No. 21/2002-Customs, dated 1-3-2002, as amended.
(i) Sl. No. 30-11 of Notification No. 21/2002-Customs, dated 1-3-2002 as amended reads as under:
Condition No. 5 of the exemption states that the importer should follow the procedure set out in Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 1996.
(j) The presence of the term "edible grade'' in the Exemption above clearly indicates that the exemption is primarily available only to goods of edible grade and not to goods which are not of edible grade. The conditions like Acid Value should be more than 4 and that Carotenoid contents should be in the range of 250 mg/kg. to 2500 mg/kg., will be applicable only after it is confirmed that the goods are of edible grade. In case the goods are not of edible grade, then these subsequent conditions will not be applicable. The term "Edible grade" has to be read in terms of supplementary notes to chapter 15 as the exemption is applicable only to chapter 15 and, therefore, in terms of Appendix B of Prevention of Food Adulteration Rules, 1955. Since the Appendix B of these Rules states that for Palm Oil the acid value should be less than 10, the Palm oil of edible grade would mean Palm oil with acid value less than 10. Any other interpretation of the exemption would mean that the exemption is available to all kinds of palm oil which would not be correct because of the presence of the words "of edible grade" after the words "the following goods" in the exemption notification.
(k) There are innumerable case laws, which state that the exemption notification should be read strictly. The term ''edible grade" is not open ended in the exemption, but is a closed ended one.
(l) The imported goods were, therefore, detained. They have since been seized. However, the importers have been given an opportunity to get the goods provisionally released on bond and bank guarantee.
(m) The petitioner has also referred to a judgment dated 16-6-11 of the Hon''ble High Court of Calcutta, reported as
3.3. The benefit of the notification was being claimed by the importer and the same was being allowed as per his declaration. However, in the instant case, based on intelligence report that the acid value of the consignments was more than 10, the goods were got tested and the mis-declaration was detected. The notification benefit being claimed by the importer was on the premise that the imported Crude Palm Oil was of ''Edible grade'' but based on the test report as detailed hereunder, the imported goods are not as declared.
3.4. The term "Edible grade" is defined in Supplementary Note 1 of Chapter 15 of Customs Tariff as under:
1. In this Chapter, "edible grade", in respect of a goods (i.e. edible oil) specified in Appendix B to the Prevention of Food Adulteration Rules, 1955, (PFA) means the standard of quality specified for such goods in that Appendix.
3.5. As per this Note, this term "edible grade" has to be read according to Appendix B to the Prevention of Food Adulteration Rules, 1955 (PFA). According to the specification given in Appendix-B of the PFA Rules, the Palm Oil should have acid value less than 10. Thus, reading the Supplementary Note 1 of chapter 15 along with Appendix B of the PFA Rules, indicates that Palm Oil of edible grade should have acid value less than 10 and that if it is more than 10, it cannot be treated as of edible grade.
3.6. Thus, the claim of the importer that concessional rate of duty was allowed by the Customs is wrong. The clearances were allowed on the basis of declarations filed before Customs. Since these declarations have been found to be wrong, action under Customs Act shall be taken for filing wrong declaration besides demanding duty. However, since the earlier consignments have been cleared, no specific comments can be made as regards the nature of imported goods (edible grade or otherwise) with respect to those consignments.
3.7. The petitioner has mentioned that 15,049.895 MTs of Crude Palm Oil was stored in Tank No. 2P, 2S, 4P, 4S, 6P and 6S and that the acid value was 8.91 as per the Survey Report at Load Port. Balance 2000 MTs was stored along with the remaining goods weighing 15499.472 MTs also loaded at the same port and stored in Tank No. IP, IS, 3P, 3S, 5P and 5S respectively and the acid value of this consignment was 10.38, i.e. more than 10. Thus, the petitioner has admitted that more than 50% of the cargo had acid value more than 10 at the time of its loading from the load port. It may be mentioned that any prudent shipper would store two different types of cargo separately i.e. Tank 1, 2, 3 would be filled with one type of cargo and tanks 4, 5, 6 with different type of cargo. In this case, however, the cargo has been filled up in alternate tanks. This coupled with the fact that both the exporter, the transporter and the major importer belonged to the same group of companies raises suspicion about the intention of the importer.
3.8. The entire cargo was being imported from M/s. Cargill International Pvt. Ltd., Singapore. There was only one CHA, M/s. Narendra Forwarders who was handling import formalities on behalf of the importers at the time of filing IGM or at the time of drawal of samples. Further, the IGM did not indicate that there were different types of Crude Palm Oil in the ship and similar declarations were filed for the entire cargo. The CHA also did not give description at the time of drawal of samples. Therefore, the petitioner has now come out with this contention when the entire cargo has been seized that half of the cargo had acid value less than 10. This contention appears to save himself from its declaration in respect of at least half of the cargo.
3.9. Since the test results from CRCL Kandla indicated that acid value was 11, i.e., more than 10, the appeal was filed with the PHO, Laboratory, Pune which confirmed that the sample had acid value more than 10. Thus, it becomes evident from the test results of PHO that the cargo imported in MT. Horizon is not eligible for exemption.
3.10 The Circular No. 29/97-Customs, dated 31-7-1997 was followed by Circular No. 40/2001-Cus., dated 13-7-2001. This circular states in para 5 that "if it is viewed that crude palm oil containing free fatty acids, acid value higher than the limits prescribed under the PFA Act, 1954 falls in the category of the edible grade, because it can be subsequently refined to make it fit for human consumption, then the concessional rate provided under serial number 29 of the table annexed to the Notification 17/2001 may be redundant and would defeat the intention of the Government for giving the concessional duty for crude oils used for industrial purposes and not for edible purposes". Thus the circular acknowledges that it may not be correct to say that crude palm oil containing free fatty acids, acid value higher than the limits prescribed under the PFA Act, 1954 should be treated as of edible grade because it can be subsequently refined to make it fit for human consumption.
3.11 The facts of the present case are different since the benefit of the concessional rate of duty is applicable for goods ''Vegetable oil of edible goods''. In the subject case the goods are not of edible grade as the acid value is more than 10. The upper limit is not specified in the notification only because the benefit is only for ''edible grade'' which means having acid value not more than 10 as per PFA Act, 1955.
3.12 The testing has been done twice at two different laboratories namely CRCL, Kandla and CFL, Pune. As stated, hereinabove, the samples were drawn in the presence of the representative of importer. Hence, it is felt that the contention of importer is an after-thought. The importers have been given opportunity to get their goods cleared provisionally on bond and bank guarantee.
3.13 The Department is not stating that the petitioner desires to divert the goods. The Department is only of the view that they are not entitled for exemption under Notification No. 21/2002-Customs.
3.14 The issue here is not whether the goods in question are food or not. The question is whether the goods are entitled for Customs duty exemption.
3.15 The Appendix B to PFA Rules (now Food Products Standard and Food Additives) Regulations, 2011 clearly state that the Palm Oil should have acid value not more than 10. This read with supplementary notes to Chapter 15 of the Custom Tariff Act indicates that Palm Oil of edible grade should have acid value not more than 10. As per this Note, this term "edible grade" has to be read according to Appendix B to the Prevention of Food Adulteration Rules, 1955 (PFA). According to the specification given in Appendix-B of the PFA Rules, the Palm Oil should have acid value less than 10. Thus, reading the Supplementary Note 1 of Chapter 15 along with Appendix B of the PFA Rules, indicates that Palm Oil of edible grade should have acid value less than 10 and that if it is more than 10, it cannot be treated as of edible grade.
3.16 The benefit of the concessional rate of duty is applicable for goods ''Vegetable oil of edible goods''. In the subject case, the goods are not of edible grade as the acid value is more than 10. The upper limit is not specified in the notification because the benefit is only for ''edible grade'' which means having acid value not more than 10 as per PFA Act, 1955.
4. The Revenue subsequently filed further affidavit sworn on 9th February 2012 wherein the Revenue has almost verbatim reiterated and repeated what has been stated hereinabove in paragraphs 4.2 (f), (g), (h), (i), (j) and has further stated that:-
4.1. So far as the goods imported are liable to 100% duty and the claim for exemption can be made only if it meets with the aforementioned requirements, and, therefore, the petitioners are not entitled to exemption.
4.2. The petitioner herein has imported Crude Palm Oil falling under sub-heading 1511 10 00 of the First Schedule to the Customs Tariff Act, 1975. The said sub-heading do not provide for the edible grade. However, for claiming the benefit of exemption the Crude Palm Oil must be of edible grade as further defined in Chapter 15 of the First Schedule to the Customs Tariff Act, 1975 by way of Supplementary Note meaning thereby "Edible Grade" in respect of goods (i.e., edible oil) specified in Appendix B of the Prevention of Food Adulteration Rules, 1955 means the standard of quality specified for such goods in that Appendix."
4.3. There is an upper limit of acid value 10 for availing the exemption.
4.4. If the notification is not read in its strict sense, then even industrial grade of Palm Oil would also get exemption and it would enter the food stream.
4.5. In view of the aforesaid facts and circumstances, the judgment rendered by the Hon''ble Kolkata High Court in the case of Gokul Refoils & Solvents Pvt. Ltd. v. Union of India & Others (supra) has no application to the facts of the cases on hand inasmuch as according to paragraph 52 thereof, "the principal question that arises for determination in this appeal is whether the Palm Oil sought to be imported by the appellant was a prohibited goods within the meaning of the Customs Act", whereas in this case the issue is, whether exemption is available to Crude Palm Oil having Acid Value more than 10. In paragraph 64 of the aforesaid judgment, the Hon''ble High Court has held that even if the acid contents is found to be more than 10% for that reason the duty may vary. Thus, the Hon''ble High Court has acknowledged that the goods should not be stopped from being imported, but at best benefit of exemption notification may not be allowed and higher duty may have to be charged.
4.6. The Additional Commissioner of Customs (Port), Custom House, Kolkata has informed in letter F. No. S202GR-I(P)-24/2011A, dated 7-2-2012 that the Department did not appeal against the order passed by the Hon''ble Kolkata High Court in the matter of Gokul Refoils and Solvents Ltd. v. Union of India & Others. As regards the order passed by the Commissioner of Customs (Appeals) in the case of Gokul Refoils & Solvents Pvt. Ltd., it is not binding on the Commissioner of Customs, Kandla. However, it has been confirmed by the Assistant Commissioner of Customs (Fort), Custom House, Kolkata in letter F. No. S202GR-I(P)-24/2011A, dated 7-2-2012 that the Order-in-Appeal No. KOL/CUS/CKP/213/2011, passed by Shri V.K. Puri, Commissioner (Appeals), Kolkata has been accepted by the Committee of Commissioners.
5. After hearing the learned counsel for the parties and after going through the materials on record, we find that in the case of Gokuls Refoil (supra), the question before the Calcutta High Court was primarily whether similar consignment of Crude Palm Oil (edible grade) having acid value of more than 10 was prohibitive goods. In the case before us, the specific defence of the Revenue is that it is not challenging the question of importability of the goods as a prohibitive goods but its contention is that this type of goods is not entitled to exemption under the Customs Notification No. 21 of 2002 as the acid value is more than 10 and for that reason, it has permitted provisional release of the goods on conditions.
6. It further appears from records that pursuant to the decision of the Calcutta High Court holding that the similar goods were not prohibitive ones and consequently, passing direction for deciding the question of duty, the Commissioner (Appeals), Kolkata, on adjudication, in Appeal No. KOL/CUS/CKP/213/2011 held that the goods in question is an exempted goods in terms of SI. No. 30-11 of Notification No. 21/2002-Customs, dated 1-3-2002 as amended, and against such decision, the Revenue has decided not to prefer any appeal as the Committee of Commissioners has decided to accept such decision.
7. Therefore, the only question that arises for determination in this application is whether the Revenue was justified in refusing the benefit of exemption Notification No. 21, dated 1st March 2002, Sl. No. 30 as amended simply because on chemical analysis of the sample drawn from the consignment it was observed that the acid value was about 10%.
8. After going through Sl. No. 30 of the above notification as quoted above, we find that crude palm oil falling under Heading 1511 having Acid Value of 4 and above and the total carotenoid (as beta carotene) in the range of 250 mg/kg. to 2500 mg/kg in loose or bulk form for manufacture of refined oil, refined palmolein, vanaspati, bakery shortening or inter-esterified fats are totally exempted on condition No. 5.
9. There is no dispute that the consignments in question contain total carotenoid (as beta carotene) in the range of 250 mg/kg. to 2500 mg/kg but the only reason for not granting exemption is that the acid value is above 10, notwithstanding the fact that in the said notification exemption is available even in cases of crude palm oil falling under Heading 1511 having an acid value of 4 and more. According to the Revenue, as under the Prevention of Food Adulteration Rule, palm oil containing acid value of 10 or more is not fit as edible, the consignment in question having acid value of more than 10, cannot be termed as edible.
10. In our opinion, for the purpose of construing an exemption notification, what is indicated in the notification should be strictly followed. In the exemption notification, under Serial No. 30, three specific items have been described as goods of edible grade under three different clauses viz. (A), (B) and (C). All those three goods fall under the Heading 1511 notwithstanding the fact that the heading 1511 contains no item of edible grade unlike Headings 1507, 1508, 1509, 1510, 1512, 1514, 1515, 1516, 1517 and 1518 of Chapter 15. Thus, the supplementary notes attached to Chapter 15 defining the edible grade applies only to those headings under the said Chapter where the phrase "edible grades" find place. The exemption notification, on the other hand, in spite of the fact that the Heading 1511 contains no item of edible grade, specifically recognizes three items of Heading 1511 as "edible grade" for the purpose of giving exemption only.
11. In the notification in question, crude palm oil falling under Heading 1511 having an acid value of 4 or more is fully exempted provided the total carotenoid (as beta carotene) is in the range of 250 mg/kg. to 2500 mg/kg. The aforesaid item has been described as edible grade only for the purpose of exemption by specifically declaring that "the following goods of edible grade, namely, (A), (B) and (C)" would be fully exempted by giving specific description of those three categories.
12. We are unable to accept the contention advanced on behalf of the learned advocate for the Revenue that we should read the notification as acid value of 4 or more but not more than 10 instead of 4 or more as indicated in the exemption notification by taking aid of the schedule of the Prevention of Food Adulteration Rules because in our opinion, help of supplementary notes under Chapter 15 cannot be taken when Heading 1511 under Chapter 15 does not contain any goods of edible grade.
13. It is not a case where the petitioner has falsely declared the goods as refined vegetable oil and consequently, a food within the meaning of Food Safety and Standards Act, 2006 and was ultimately found to be unfit as a food. On the face of the declaration that the same was crude palm oil (edible grade) which falls under part (II) of Serial No. 30 of the exemption notification, it cannot be legitimately contended that such item became a prohibited goods within the meaning of the Customs Act.
14. Even if we look at the definition of ''food'' contained in Section 3(j) of the Act of 2006, the declaration in the Bill of Entry did not claim it to be a ''food'' within the meaning of the said Act. Therefore, unless the item is intended to be used for immediate human consumption, the same, at any rate, cannot come within the definition of ''food''. No material has been placed before us indicating the intention of the applicants was to use the imported item in that very form for human consumption. The Revenue in the affidavit has also made it plain that it is not branding the consignment as a prohibited goods.
15. Once we find that the description of the goods has been given as crude palm oil falling under Heading 1511 having an acid value of 4 or more, and at the same time the total carotenoid (as beta carotene) in the range of 250 mg/kg. to 2500 mg/kg, the petitioners are entitled to benefit of full exemption on Condition No. 5. The declaration of "crude palm oil (edible grade)" given by the petitioner is in conformity with the Serial No. 30 of exemption notification and thus, no fault can be found from such declaration given by the petitioner.
16. Apart from the aforesaid facts, it appears that pursuant to the decision of the Calcutta High Court in the case of Gokul Refoils & Solvents Pvt. Ltd. (supra), the Customs authorities itself have found that the consignment in question having more than 10 acid value is fully exempted from duty. It appears that the Committee of Commissioners has decided not to challenge the said order. Such being the position, there is no justification on the part of the Revenue to take a different view in the consignment involved in these writ-applications.
17. As pointed out by the Supreme Court in the case of Commissioner of Customs (Preventive), Gujarat v Reliance Petroleum Limited reported in 2008 (227) E.L.T. 3 (S.C.), interpretation of an exemption notification depends upon the nature and extent thereof, and the terminologies used in notification have an important role to play. According to the said decision where exemption notification ex facie applies, there is no reason as to why purport thereof would be limited by giving a different construction.
Applying the aforesaid principles to the facts of the present case, we are of the view that under the notification, as the limit of acid value has been given as 4 and above, there is no reason to construe the notification by taking aid of the Prevention of Food Adulteration Rules, 1955 which has no application to the facts of the present case when the petitioners intended to import the same not as a ''food'' but as crude palm oil (edible grade) as pointed out in the exemption notification.
18. The Supreme Court in the case of
In the case before us, if we alter the limit of acid value from 4 and more to between 4 and 10, it will be a direct violation of the language of the notification.
19. At this juncture, it will be also profitable to refer to the decision of the Supreme Court in the case of Jayaswals Neco Ltd. v. Commissioner of Central Excise, Nagpur reported in 2006 (195) E.L.T. 142(S.C.) : 2007 (8) S.T.R. 305 (S.C.) where the Supreme Court has laid down as a proposition of law that if the Department accepted a principle laid down in an earlier case, it should not be permitted to take a contrary stand in a subsequent case. It was further pointed out that classification of goods adopted in earlier decisions must not be lightly disregarded in subsequent decisions.
In the case before us, the Revenue in the case of Gokul Refoils & Solvents Pvt. Ltd. (supra) has accepted the decision of the Commissioner of Appeals that this type of consignments is duty free and decided not to prefer appeal by relying upon the decision of the Committee of Commissioners.
20. Therefore, on the selfsame material if importer in a different State gets benefit of exemption whereas the importers of the State of Gujarat is deprived of such benefit, they will not be able to compete with importers of other States in the same field of business. On that count also, we are of the view that the plea of the Revenue is not tenable.
21. We are, however, quite conscious of the position of law that by taking benefit of Article 14 of the Constitution of India, one cannot get benefit of a wrong order, but at the same time, when Committee of Commissioners has decided to accept the decision and decided not to prefer appeal, as it appears from the affidavit of the Revenue, the present case cannot be said to be one of acceptance of a wrong order when the decision not to prefer the appeal is of the Committee of Commissioners and is a positive decision.
22. On consideration of the entire materials on record, we, therefore, hold that in the cases before us, there was no justification for detention of the goods and issue of show cause notice by the Revenue. We have already pointed out above that in the course of hearing of these writ-applications, the Revenue modified its earlier stance by accepting that they are not claiming that the goods in question is prohibited one but restricted their contention to the question of applicability of the exemption notification only.
23. We, therefore, hold that crude palm oil imported, which falls within Serial No. 1511 having acid value of more than 4, is entitled to get benefit of exemption of duty, and such exemption cannot be taken away by adding to the words in the notification as " between 4 and 10".
24. We, therefore, allow these writ-applications. By virtue of interim order granted during the pendency of these applications, a direction was given for releasing the goods on submission of bond. Since the writ-applications succeed, the bonds be discharged. If in any of the cases the goods have not yet been released, the Customs authorities are directed to release the same within a month from today.
25. All the writ-applications are thus allowed in terms of the above order. In the facts and circumstances of the case, there will be, however, no order as to costs.
26. [Further Order].-After this order is pronounced, Mr. Ravani, the learned Advocate appearing on behalf of the Revenue prays for stay of operation of the order regarding the demand of bond for release of the goods. In view of what has been stated above, we find no reason to stay our order. The prayer is refused.
