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3.31 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.

3.32 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 of less than 0.5 as will be evident from Board Circular 29/97 dated 31st July, 1997.

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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.

4.13 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.

4.14 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.

4.15 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.

10. 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.