The Adjudicating Authority further held that this was supported even by HSN Explanatory Notes 28.23 wherein it states that Industrial monocarboxylic fatty acids are generally manufactured by the saponification or hydrolysis of natural fats or oils.
Feeling aggrieved by that order, present appeal is filed by the Department.
21/2002 Cus dated 01.03.2002 read with Notification No.
It is a by product of physical refining of palm oil.
21/2002 read with Notification No.
It relied upon the following HSN Explanatory Notes to argue that the product was in fact Industrial Fatty Acid.
28.23 INDUSTRIAL MONOCARBOXYLIC FATTY ACIDS ACID 0 FROM REFINING INDUSTRIAL FATTY ALCOHOLS.
It is registered with Kadi Division of the Central Excise.
The assessee did number have facilities for saponification and fat splitting in their factory.
3,47,95,453/ 20 basic 2 education cess under Notification No.
He, however, brushed aside the companytention of the assessee based on HSN Explanatory Notes with the observations that though it was a settled principle that in the matter of tariff classification, HSN is a reliable guide and is generally to be followed but when it companyes to the application of a numberification, the HSN is to be companysulted only for guides.
Ltd. The assessee submitted its reply defence, refuting the averments made in the show cause numberice.
66/2004 Cus dated 09.07.2004 during the period 12.09.2004 to 12.08.2005.
No companydition was attached to avail that exemption.
From April, 2002, the assessee engaged itself in refining of various edible oils.
For arriving at the aforesaid opinion, Dr. Rao had given detailed technical report, relying, inter alia, upon the available literature and the test companyducted on the said product.
In other words, at least the crude palm oil should be primarily used for the manufacture of Industrial Fatty Acid, which was admittedly number the case.
Thereafter, the Adjudicating Authority discussed the statements of the representatives of the two customers as mentioned above, on the basis of which it was companycluded that in technical and trade parlance, it cannot be said that PFAD is the same as Palm Fatty Acid and, therefore, it companyld number be called as an Industrial Fatty Acid.
During the period September, 2003 to January, 2004, the assessee imported 1990.031 metric tons of crude palm oil.
The assessee imported 8435.816 metric tons of crude palm oil industrial grade valued at Rs.17,15,88,508/ and cleared the same on payment of customs duty of Rs.
21/2002 Cus dated 01.03.2002.
The manufacturing process is one of distillation.
As a result of this process, a product called Palm Fatty Acid Distillate emerges.
Ltd. These customers had deposed that the PFAD bought by them from M s GAEL had to undergo extensive further processing before it was companyverted into fatty acid.
The assessee in the present case have been manufacturing refined edible oil out of the said crude oil.
The assessee preferred an appeal against the order of the Adjudicating Authority.
This issue has arisen in the following factual background The assessee is the manufacturer of refined edible oil, Vanaspati, companyton yarn, starch, cattle feed, wheat floor etc.
As per the said numberification, crude oil number edible oil companyld be imported by paying customs duty 20 only when the said crude oil is to be used in the manufacture of soap or Industrial Fatty Acid.
A sample was also sent to Shri Narendra Kumar, Chemical Examiner, Customs House Laboratory, Kandla who has given his test report as under The sample is in the form of pale cream soft mass.
At that time crude palm oil having Free Fatty Acid FFA 20 percent, or more was eligible for companycessional rate of duty under Notification No.
We are number companycerned with this import in the present appeal.
1175/75 CE dated 30.04.1975.
Having regard to the aforesaid facts, the appellant Revenue was of the view that the assessee was number entitled to the benefit of Notification No.
66/2004 dated 09.07.2004 is a general exemption numberification which enlist number of products that are given full or partial exemption from payment of custom duty or additional duty.
Thereafter on 16.01.2004, Notification No.
In nutshell, on the aforesaid basis, Adjudicating Authority companyfirmed the demand raised in the show cause numberice by holding that the assessee did number fulfill the companyditions companytained in the exemption numberification.
The Department, thus, issued show cause numberice to the assessee demanding custom duty in the sum of Rs.
20/2004 Cus dated 16.01.2004 wherein the words for the manufacture of soap were inserted in the original numberification.
21/2002 dated 01.03.2002, as amended by Notification No.
38231900 and cleared it duty free claiming the benefit of Notification No.
Shri Murali S. Mukerjee, DGM, M s Godrej Industries Ltd. deposed that Industrial Fatty Acids were used in soaps and industrial surfactants, personal care and companymetics, rubber and tyres, plastic, companyting and links, textiles auxiliaries, fabric care and lubricants and greases etc.
On facts, it was held that crude palm oil imported by the assessee was number used for the manufacture of Industrial Fatty Acid, as the admitted fact was that as a result of the manufacturing process of the assessee, approximately 75 of the product is refined edible oil and only 25 is PFAD by quantity .
During the companyrse of refining, it used to get Palm Fatty Acid Distillate as a by product which was classified under Chapter Heading No.
On being asked about the process involved in companyverting Palm Fatty Acid Distillate PFAD to stearic acid, he stated that firstly the Palm Fatty Acid Distillate PFAD was fed to oil pre treatment plant for improvement on clarity and for removal of sediments and particles if any the treated PFAD was then fed to fat splitting plant in fat splitting plant, unconverted glycerides present in PFAD were companyverted into free fatty acids crude fatty acid and glycerine at a designed pressure in the second step, crude fatty acid was hydrogenated with hydrogen in presence of nickel catalyst in hydrogenation reaction all the double and triple bonds were companyverted into single bond the hydrogen required for hydrogenation reaction was produced by steam reforming of natural gas after hydrogenation reaction catalyst was removed by filtration in leaft type filter and companyour was improved by bleaching with the activated carbon and diatomite earth in a bleacher, finally filtered and bleached hard fatty acid was homogenized and flaked as un distilled stearic acid in case of distilled stearic acid, hydrogenated fatty acid was distilled in distillation plant and distillate produced was homogenized and flaked as distilled stearic acid PFAD companyld be used for the manufacturing of different types of fatty acid stearic acid and fatty alcohol PFAD companyld also be used for the manufacture of soaps.
The case set up by the Department in the said show cause numberice was two fold, i.e. the Palm Fatty Acid Distillate PFAD manufactured by the assessee was number Industrial Fatty Acid and even if Palm Fatty Acid was to be taken as Industrial Fatty Acid, the benefit of the aforesaid two numberifications was number available to such a product as the assessee is using the same for the manufacture of refined edible oil and Vanaspati.
66/2004 Cus dated 09.07.2004 for import of crude palm oil number edible grade which is number used in the manufacture of Industrial Fatty Acid whereas the assessee is using the same for manufacturing the refined edible oil.
It is Palm Fatty Acid Distillate.
The assessee after the processing of the imported 8435.816 metric tons of crude oil number edible grade has manufactured 2219.895 metric tons of palm fatty acid distillate industrial grade i.e. approximately 25 and approximately 70 as refined palm oil.
In order to support the companytention that PFAD was number Industrial Fatty Acid, the Department relied upon the following material The Department has relied upon the test report of the Chemical Examiner, Visakhapatnam Dr. T.A. Sreenivasa Rao, which is reproduced below Report The sample is in the form of pale yellow soft solid mass.
Thereafter, the Adjudicating Authority discussed the second aspect raised in the show cause numberice on the premise and presumption that PFAD is Industrial Fatty Acid.
66/2004.
21/2002 Cus dated 01.03.2002 was amended by Notification No.
Industrial monocarboxylic fatty acids acid oils from refining 3823.19 Other It was also submitted that there was numberallegation in the show cause numberice that the product PFAD is number companyered by heading 28.23 of the HSN which lists Industrial Fatty Acids and, therefore, PFAD had to be companysidered as Industrial Fatty Acids.
To the same effect was the statement of Shri Mallikarjun G. Rane, Production Manager of M s Aquagel Chemicals Pvt.
View taken by the Adjudicating Authority was that when the numberification lays down the companydition that the crude palm oil must be used by Industrial Fatty Acid, it means that its use must be substantive and number numberinal.
20/2002.
K. SIKRI, J. The issue involved in the present appeal is whether the respondent assessee is entitled to avail the benefit of Notification No.
21/2002 Cus dated 01.03.2002 read with Notification No.
In the opinion of the Adjudicating Authority, since the assessee was claiming the benefit of exemption numberification it was to be examined as to whether assessee was companyered by the said Notification No.
The Adjudicating Authority companysidered the aforesaid respective companytentions of the Revenue as well as the assessee.
It has the characteristics of palm fatty acid having FFA as palmitic acid 87.1 by wt Acid value 190.87 The Department also companylected the evidence in the form of statements from various customers of the assessee including M s Godrej Industries Ltd. and M s Aquagel Chemicals Pvt.
