Custom, Excise & Service Tax Tribunal
Yes vs Represented By : Shri G.P. Thomas, A.R on 24 March, 2014
CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL, West Zonal Bench, Ahmedabad Appeal No. : C/5/2011 Arising out of : OIA No. 198/2010/Cus/Commr(A)/AHD dated 12.10.2010 Passed by : Commissioner of Customs (Appeals) Ahmedabad For approval and signature : Hon'ble Mr. M.V. Ravindran, Member (Judicial) Honble Mr. H.K. Thakur, Member (Technical) 1 Whether Press Reporter may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? No 2 Whether it should be released under Rule 27 of CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? Yes 3 Whether their Lordships wish to see the fair copy of the Order? Seen 4 Whether Order is to be circulated to the Departmental authorities? Yes Appellant (s) : Commissioner of Customs Ahmedabad Represented by : Shri G.P. Thomas, A.R. Respondent (s) : M/s. Krishna Petrochemicals
Represented by : Shri P.M. Dave, Advocate CORAM :
Hon'ble Mr. M.V. Ravindran, Member (Judicial) Honble Mr. H.K. Thakur, Member (Technical) Date of Hearing/ Decision : 24.03.2014 ORDER No. A/10442 / 2014 Dated 26.03.2014 Per : Mr. H.K. Thakur;
This appeal is filed by Revenue against OIA No. 198/2010/Cus/ Commr(A)/AHD dated 12.10.2010 passed by Commissioner (Appeals) Ahmedabad deciding the classification of the imported Palm Kernal Acid Oil, imported as per Bills of Entry No. 665976 dated 16.12.2009, under CTH 38231900 of the Customs Tariff Act, 1975.
2. Brief facts of the case are that M/s. Krishna Petrochemicals, Ahmedabad (Respondent) filed the above bill of entry seeking classification of the imported Palm Kernal Acid Oil under CTH 38231900. The samples of the imported goods were drawn and sent to Chemical Examiner, Customs & Central Excise Laboratory, Vadodara. Chemical Examiner, Vadodara vide his report dated 01.1.2010 gave the following report:-
The sample is in the form of black coloured viscous liquid, it is having FFA (as lauric acid) = 23.1 and it is other than Palm Kernal Acid Oil. 2.1 On a further query Chemical Examiner, Vadodara vide letter dated 08.02.2010 gave the following clarification:-
The sample u/r is described as Palm Kernal Acid Oil. Acid Oil is specified by IS 1209:1986. % FFA Min is 50.0. As the samepl3e is having %FFA=23.1 (as Lauric Acid).
The same is other than Acid Oil. There is no term called industrial Grade in vegetable oils. Either it is edible or non edible grade. The same is of other than edible grade. The sample is described as by product of Palm Kernal Oil. The sample is composed of Palm Kernal Based Vegetable Oil. It is other than crude RBD oil or its fractions.
2.2 Based on the above reports, show cause notice B/E 665976 dated 24.4.2010 was issued to the respondent for classifying the imported goods under CTH 15132910. After following the principles of natural justice the classification was decided to be under CTH 15132910 for levy of customs duty by the Adjudicating authority under OIO No. 115/Assistant Commissioner/ICD/IMP/2010 dated 26-18.05.2010.
2.3 A further report F. No. 38-Cus/C-19/2010-11 dated 06.9.2010 was received from Chemical Examiner as follows:-
The fatty acid profile of sample under reference does not conform to fatty acid profile of Palm Kernal Oil and/ or Palm Oil and its fractions 2.4 Comments of the respondent obtained were sent to the Department and Assistant Commissioner of Customs ICD, Sabarmati, vide F. No. VIII/48-01/ICD/2009 dated 24.09.2010 expressed the stand of the Revenue as follows:-
Director, CRCL, New Delhi has categorically denied that the product of sample does not conform to the specifications for acid oil as laid down in IS 12029:1986. The exemption Notification 21/2002-Customs dated 01.3.2002 as amended vide Notification No. 91/2007-Customs dated 02.08.2007, which made distinction of product of less than and more than 20 percent FFA for items falling under CTH 1513. The contention of the importer that the goods to be classified under CTH 15 should have maximum of 5% FFA is not acceptable.
As far as test results and opinion of the Chemical Examiner is concerned, the goods cannot be treated as Acid Oil and it may not be classified under CTH 38. 2.5 First appellate authority decided the classification of the imported goods under CTH 38231900 as per paras 13 & 14 of the OIA and is reproduced below:-
13. From the totality of the facts, I have concluded that the impugned goods which is essentially composed of triglycerides of fatty acids and free fatty acids (fatty material), is excluded from CTH 15132910, and in fact it is entirely excluded from Chapter 15 of the Customs Tariff Act, 1975. From the findings above, purely based on facts of the instant case, I hold that the nomenclature of the impugned goods qualify as semi-acid oil, and it merits classification under CTSH 38231900 CTA, 1975.
14. In accordance with the above, I set aside the impugned order and hold that the imported goods merit classification under CTSH 38231900 as semi acid oil. The appeal is disposed of accordingly.
3. As the order passed by the first appellate authority was not honoured present respondent approached Gujarat High Court by a SCA 4145 of 2011 and Honble High Court vide order dated 12.05.2011 passed the following order:-
This petition is, therefore, disposed of with the following directions:-
[1] The goods of the petitioner, covered under the Bill of Entry No. 665976 dated 16.12.2009, shall be released on the following conditions:-
(a) That the petitioner has to deposit entire customs duty as per the classification accepted by the appellate authority in its order dated 12th October 2010;
(b) The petitioner provides immovable security for differential duty i.e., the duty already paid and additional duty demanded by the Adjudicating authority.
(c) This arrangement would be, of course, subject to the final outcome of the Departments appeal which is pending before the Tribunal.
[2] It would be open to the Department to request the Tribunal to take up the Appeal for early hearing.
[3] We have expressed no opinion on the merits of the classification and leave the entire issue open to be judged by the Tribunal in accordance with law.
4. Early hearing of the present appeal was allowed by an order No. M/1749/WZB/HAD/2012 dated 11.09.2012 of this Bench. Shri G.P. Thomas (AR) appearing on behalf of the Revenue argued that as per the directions of Commissioner (Appeals) a fresh sample was sent to CRCL, New Delhi who gave the following test report:-
The sample under reference is in the form of brownish black, viscous, oily liquid. It is essentially composed of triglycerides of fatty acids and free fatty acid (fatty material) having following constants:-
1. Free Fatty Acid (F.F.A.) calculated as Oleic Acid = 34.0% by wt.
2. Acid Value = 67.5
3. Iodine Value = 35.8
4. Saponification Value = 184.9
5. Total Fatty Matter (TFM) = 93.6% by wt.
6. Unsap. Matter = 12.6% by wt.
As per the constants determination as above, the sample under reference does not conform to the specification of Acid Oil laid down in I.S. 12029:1986. Testing method adopted for analysis as laid down in aforesaid IS.
F.F.A can also be calculated in terms of palmitic or lauric acid, in specific case, if required.
To decide whether it conforms to Palm Kernal Oil or not, some test is still to be carried out and result will be communicated shortly
5. Shri P.M. Dave (Advocate) appearing on behalf of the respondent argued that after detailed discussions on the issue and after giving opportunity to the Revenue, first appellate authority decided the classification of imported goods under CTH : 38231900. That there is no argument advocated by the Revenue that imported goods need classification under CTH 1515 and Commissioner (Appeals) had only the option of deciding the classification of imported goods either under CTH 1513 or CTH 38231900, as per the show cause notice issued. That Revenue has not taken any ground in this appeal as to why classification decided by Commissioner (Appeals) under CTH 38231900 is not correct. It was his case that at this stage Revenue can not go beyond the scope of show cause notice that CTH 1515 was the correct classification of the imported goods. Learned advocate, interalia, relied upon the case law of NTB International Pvt. Limited vs. CCE, Mumbai [2013 (296) ELT 271 (Tri. Del.)].
6. Heard both sides and perused the case records. The issue involved in the present appeal filed by the Revenue is whether classification of the imported goods Palm Kernal Acid Oil can now be made under CTH 1515 when the original contest was for classification of the imported goods under either CTH 38231900 or CTH 15132910 before the Adjudicating authority and the first appellate authority. The dispute taken before the first appellate authority by the importer (present respondent) was decided under CTH 38231900 after getting further testing of the sample of imported goods. Even after receipt of the subsequent test report, as per the directions of first appellate authority it was not agitated by the Revenue that classification of the imported goods could be other than CTH 38231900 or CTH 15132910. When an issue is not the subject matter of the show cause notice first issued and was not agitated before the lower authorities, it has to be held that Revenue has no justification in agitating an issue before this Bench which was not agitated before the lower authorities. Accordingly, the lower authorities can not be directed to go beyond the scope of the show cause notice.
6.1 The above view is further fortified by the case law of NTB International Pvt. Limited vs. CCE, Mumbai-III (supra). Para 2 and 6 of this judgment are relevant and are reproduced below:-
2. The brief facts of the case are that? the show cause notice was issued to the appellant to classify their product under Heading 5910.00 on 16-2-2000. The goods were sent for chemical examination and as per chemical test report dated 23-3-2000, the authorities did not issue any corrigendum to the show cause notice to classify the product under Chapter Sub-heading 4010.90. Thereafter, the adjudicating authorities classify the product under Heading 5603.00, as claimed by the appellants. Against that order Revenue filed an appeal before the Commissioner (Appeals) to classify the product under Sub-heading 4010.90. The contention of department was opposed by the appellants on the ground that the Commissioner (Appeals) cannot travel beyond the show cause notice, as in the show cause notice proposed to classify the product under Chapter Sub-heading 5910.00. Therefore, the appellant relied on the decision of this Tribunal in the case of J.D. Jones & Co. Pvt. Ltd. v. Commissioner of C. Ex., Calcutta-II reported in 2003 (154) E.L.T. 106 (Tri.-Kolkata), Airport Authority of India v. Commissioner of Customs, New Delhi reported in 2003 (152) E.L.T. 97 (Tri.-Del.) and Mawana Steels (P) Ltd. v. Commissioner of Central Excise, Kanpur reported in 2002 (148) E.L.T. 375 (Tri.-Del.) wherein it was held that the adjudicating authority cannot travel beyond the show cause notice. The Commissioner (Appeals) considering the decision cited by the appellant held that these decisions are not relevant to the facts of the case. Therefore, he classified the impugned goods under Chapter Sub-heading 4010.90. Aggrieved from the said order the appellants are in appeal before this Tribunal on the ground that Commissioner (Appeals) has no power to travel beyond the show cause notice.
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6. It is also an admitted fact that in? the show cause notice it was not the issue before adjudicating authority below to classify the product under Chapter Sub-heading 4010.90 of the Central Excise Tariff Act. As the issue before the adjudicating authority was whether the impugned product is classifiable under Chapter sub-heading 5603.00 (as claimed by the appellant) or CH. 5910.00 (as alleged by the revenue). Therefore, we do not find any infirmity in the adjudication order. There is catena of judgments available wherein it is held that no one can travel beyond the issue involved in show cause notice. Therefore, following the said ratio, we hold that in this case the Commissioner (Appeals) has no power to travel beyond the show cause notice. In view of the above observation, the impugned order is set aside.
7. In view of the above observations there is no merit in the appeal filed by the Revenue and the same is accordingly, rejected.
(Operative part of the order pronounced in the Court) (M.V. Ravindran) (H.K. Thakur) Member (Judicial) Member (Technical) .KL 3