Custom, Excise & Service Tax Tribunal
The Asst. Commissioner Of Cus. &C.E., ... vs M/S. Nikhil Refineries (P) Ltd on 29 August, 2013
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
SOUTH ZONAL BENCH AT BANGALORE
Bench Division Bench
Court I
Date of Hearing:21/08/2013
Date of decision:
Appeal No.C/427/2008
(Arising out of Order-in-Appeal No.09/2008(V-II)Cus dt. 13/02/2008 passed by CC&CE(Appeals), Visakhapatnam)
The Asst. Commissioner of Cus. &C.E., Kakinada.
..Appellant(s)
Vs.
M/s. Nikhil Refineries (P) Ltd.
..Respondent(s)
Appearance Ms. Sabrina Cano, Superintendent(AR) for the appellant.
Mr. C.V. Narasimham, Advocate for the respondent.
Coram:
Honble Shri S.S. Kang, Vice President Honble Shri B.S.V. Murthy, Member(Technical) FINAL ORDER No._______________________ [Per B.S.V. Murthy] M/s. Nikhil Refineries (P) Ltd. (respondent) imported crude palm oil declaring the same as palm oil of edible grade. The Bills of Entry were assessed provisionally pending receipt of test results from the Chemical Examiner. The samples drawn on-board the vessel at the time of importation were tested by Port Health Officer (PHO), Kakinada and he reported that the imported crude palm oil conformed to the standards laid down under para A17.19 of Prevention of Food Adulteration Rules, 1955 (PFA) and observed that the same should be released to Indian market only after refining to the level when it conforms to the standards laid down under para A17.15 of PFA. The Chemical Examiner who examined the samples drawn from on-board the vessel and also from the shore tank, reported that the samples had acid value of more than 10 and carotenoid concentration between 419 to 430. Since the acid value of the imported oil exceeded the maximum limit of 10 prescribed as per para A17.19 of Appendix B of PFA, assessments were finalized revising the classification from palm oil (edible grade) to crude palm oil (other than edible grade). Modification in classification resulted in denial of concessional rate of duty and consequently demand for differential duty of Rs.2,03,86,446/- was confirmed. On an appeal filed by the respondent, the Commissioner(Appeals) decided that palm oil has to be treated as of edible grade in view of PHO report and remanded the case to the original adjudicating authority to redetermine the duty liability after satisfying himself as to the nature of impugned goods and fulfillment of other post-importation conditions as observed by the PHO.
2. Revenue is in appeal against the impugned order on the ground that the PHO report does not specify the acid value and also did not give any specifications of the samples tested whereas the Chemical Examiner had furnished the acid value as well as carotenoid value. Since the acid value as per the Chemical Examiners report is higher than 10, the product has to be treated as non-edible grade and therefore the impugned order has to be set aside.
3. Learned AR on behalf of the Revenue submitted that observations of the Commissioner(Appeals) that the report of the PHO should be preferred to the report of the Chemical Examiner is not correct. The Commissioner(Appeals) has relied upon the decision in the case of Ruchi Infrastructure Ltd. Vs. CC [2004(168) ELT 49 (Tri. Bang.)] to hold that in the matters relating to PFA, the PHO and the Central Food Lab are the competent authorities and not the Chemical Examiner. She submits that this is not correct and placed reliance on the decision in the cases of Kedia Overseas Ltd. Vs. CCE, Visakhapatnam [2010(253) ELT 142 (Tri. Bang.)] and Arani Agro Oil Inds. Ltd. Vs. CCE&C, Visakhapatnam [2010(256) ELT 627 (Tri. Bang.)] to submit that this observation is not correct.
4. On the other hand, the learned counsel for the respondent submits that the Chemical Examiner is not authorized to decide whether the goods are of edible grade. He also submits that PHO report is binding with regard to importability of food items. According to Chemical Examiners report, the acid value is marginally higher than 10 and this can be due to normal deterioration and improper storage conditions prior to testing and due to margin of error in testing and sampling. Even though, in the written submissions, it had been stated that the Chemical Examiners report was not made available, this point was not pressed during the hearing. Learned counsel also relied upon the decisions which have been relied upon by the Commissioner(Appeals). Further he also submits that Honble High Court of Andhra Pradesh has dismissed an appeal filed by the Revenue in the case of CCE, Vsiakhapatnam-II Vs. Shalimar Agro Tech (P) Ltd. In that case, the High Court noticed that there was a gap of more than 20 days between the first test by the PHO and the second test by the Chemical Examiner. Thereafter the Honble High Court observed that they could not find anything wrong with the Tribunals decision.
5. We have considered the submissions made by both the sides. The main ground taken by the respondent is that the PHOs report only has to be relied upon and that report is in their favour. In the case of Kedia Overseas Ltd. (supra), the Tribunal reached the conclusion that Chemical Examiners report is the one which has to be relied upon and distinguished the decisions in the cases of Shalimar Agro Tech Pvt. Ltd. and Sarda Agro Oils [2005(182) ELT 376 (Tri. Chennai)]. The Tribunal took note of the fact that in the case of Shalimar Agro Tech, the Chemical Examiners report was rejected since the testing of the imported goods was done after 9 months of the importation whereas in the case of Kedia Overseas, it was done within 11 days from the date of drawal of samples. In the case of Arani Agro Oil Inds. Ltd. (supra) also, the Tribunal considered ratios of Sarda Agro Oils Ltd. and Ruchi Soya Industries Ltd. and thereafter came to the conclusion that Chemical Examiners report has to be preferred. In the case of Shalimar Agro Tech, the Honble High Court of Andhra Pradesh had taken a view that there was a time gap of more than 20 days between the first testing by the PHO and the second test by the Chemical Examiner. Further, the Tribunal also had taken note of the fact that at the time of loading at the port of export, the goods were tested by Federation of Oil, Seeds and Fats Association International in Indonesia which issued a test report dt.06/01/2005 disclosing the acid content to be 8.66. Thereafter the Honble High Court observed that the High Court agrees with the conclusion recorded by the Tribunal that demand for differential duty cannot be sustained since acid value of samples must reflect the quality of the crude palm oil imported as on the date of import and not after a lapse of time thereafter. The discussion above would show that the ratio of the decision of the Honble High Court is that the acid value should be taken as at the time of import and this conclusion was reached on the basis of Tribunals finding that PHO report reflected the position at the time of report and therefore that should be preferred.
6. However, neither the Tribunal nor the Honble High Court had considered as to whether the acid value of the imported crude palm oil would vary with lapse of time. This aspect has not been considered at all at any stage by any authority. When the matter was heard by us also, the learned counsel for the respondent could not show any technical data/literature or the provisions of PFA to support the view that delay in testing of the sample would result in variation of acid value and carotenoid content. Both sides relied upon precedent decisions of the Tribunal wherein views have been taken in favour of the Department as well as in favour of the assessee as discussed above. However, two latest decisions of the Tribunal are in favour of the Revenue and not in favour of the assessee.
7. In the present case, on going through the records, we find that the samples were drawn by the officers of Customs House on 25/01/2005 and sent to the Chemical Examiner on 01/02/2005. It is not known on what date the Chemical Examiner conducted the examination since that is not available in the report. The report simply gives the results of the tests and all the reports in respect of many samples have been signed on 23/02/2005 only. It is not necessary that testing is done on the same day of the report and after doing the test, the report may be signed later. On the other hand, it is also seen that the PHOs report is dt. 29/01/2005 and the sample was drawn on 25/01/2005 and sent to the PHO on 28/01/2005. Chemical Examiners report did not specify the acid value in the report but the counsel for the respondent produced a copy of the report where the acid value has been indicated as 9.76. It is the submission of the respondent that the acid value would have gone up because of improper storage and lapse of time. As already observed, no supporting technical information or expert opinion or literature are produced. Even the PFA which prescribes standards also does not have any restrictions as to when exactly the test should be conducted. In fact, item A17.19 in PFA Rules, 1955, it is stated 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 A.17.15. Additionally, it shall have Flash Point (Pensky-Marten closed method)Not less than 2500 C. According to para A.17.15, besides other requirements, acid value should not be more than 0.5. In none of the specifications, it has been indicated that the test should be conducted within a specific period or if the oil is stored for more than a specific period, the acid value would go up. After going through the Appendix B, one gets an impression that the acid value may not change at all over a period since if that was so, on the basis of acid value, specifications would not have been given. As regards the claim of marginal variation, it has to be noted that the specifications do not provide for any margin of error and it has to be less than 10.
8. The importation took place on 25/01/2005 and goods were cleared under ex-Bond Bills of Entry from 29/01/2005 to 11/02/2005. The respondents were aware that samples had been drawn for conducting the test and being a regular importer, they would also be aware that the samples would be sent to Chemical Examiner for test. The goods were assessed provisionally and respondents executed a bank guarantee for Rs.46,15,000/-. There is no indication anywhere to show that the appellants made any effort to find out what was the report of the Chemical Examiner in respect of the samples drawn from their consignments and make efforts to get assessments finalized in spite of the fact that they had executed bank guarantee, for more than two years. They did not even challenge the Chemical Examiners report. If they were to check up about the report, they could have easily challenged the Chemical Examiners report and insisted for retest. The appellants also did not seek cross-examination of the Chemical Examiner or question the results. As already observed, they also did not bring out any evidence to show that there was delay in test and delay would have caused increase in acid value. If they insisted on test report and questioned the report, all these aspects would have come out and in such a situation, the date of testing as well as the effect of delay on testing would have come on record. It has to be noted that it is not only the acid value which determines the eligibility for concession but carotenoid value also is relevant and therefore the PHOs report alone, in any case, would not be sufficient and testing by Chemical Examiner was an absolute necessity in this case. The appellants are not questioning the Chemical Examiners report as regards carotenoid value but are questioning only the acid value. This means part of the report is acceptable and part of the report is not acceptable. This does not seem to be correct approach. Since PHO is responsible to test only whether the product is edible or not, the test by Chemical Examiner becomes an absolute necessity and when there is a contradiction between the two, it is for the assessee/importer to challenge the report or question the correctness by legal means to ensure that his interests are safeguarded. Appellants have not lifted a finger for two years.
9. Under these circumstances and in view of the precedent decisions of the Tribunal that Chemical Examiners report can be relied upon and in view of the facts and circumstances of this case, we find that the appeal filed by the Revenue has merit and since the acid value is more than 10 in the imported consignments, the appellant is not eligible for the benefit of concessional rate. In the result, the appeal filed by the Revenue is allowed.
(Pronounced on )
(B.S.V. MURTHY) (S.S. KANG)
MEMBER (TECHNICAL) VICE PRESIDENT
Nr
8