Gujarat High Court
Vvf India Ltd vs Union Of India on 21 November, 2025
Author: Bhargav D. Karia
Bench: Bhargav D. Karia
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Reserved On : 15/10/2025
Pronounced On : 21/11/2025
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 4418 of 2014
With
CIVIL APPLICATION (FIXING DATE OF EARLY HEARING) NO. 1 of 2025
In R/SPECIAL CIVIL APPLICATION NO. 4418 of 2014
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR. JUSTICE BHARGAV D. KARIA
and
HONOURABLE MR. JUSTICE PRANAV TRIVEDI
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Approved for Reporting Yes No
✓
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VVF INDIA LTD & ANR.
Versus
UNION OF INDIA & ORS.
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Appearance:
MR MIHIR JOSHI, SENIOR ADVOCATE WITH MR KUNAL NANAVATI
WITH MR KAUSTABH SHRIVASTAVA WITH MR VISHAL AGRAWAL for
NANAVATI ASSOCIATES(1375) for the Petitioner(s) No. 1,2
MR ANKIT SHAH(6371) WITH MR UTKARSH SHARMA for the
Respondent(s) No. 1,2,3
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CORAM:HONOURABLE MR. JUSTICE BHARGAV D. KARIA
and
HONOURABLE MR. JUSTICE PRANAV TRIVEDI
CAV JUDGMENT
(PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA)
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1. Heard learned Senior Advocate Mr.
Mihir Joshi with learned advocate Mr.
Kunal Nanavati with learned advocate
Mr.Kaustabh Shrivastava with learned
advocate Mr. Vishal Agrawal for Nanavati
Associates for the petitioner and learned
advocate Mr. Utkarsh Sharma for learned
advocate Mr. Ankit Shah for the
respondents.
2. By this petition under Article 226 of
the Constitution of India, the petitioners
have challenged the legality and validity
of the show cause notice dated 27.06.2013
issued by respondent no.2 - Additional
Director General, Directorate of Revenue
Intelligence, Ahmedabad.
3. The show cause notice is issued
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calling upon the petitioners to show cause
as to why the claim of concessional rate
of duty in terms of Serial No.57 of the
Customs Notification No.12/2012 dated
17.03.2012 which is equivalent to Serial
No.33A of the erstwhile Customs
Notification No.21/2002 dated 01.03.2002
on the import of goods namely Crude Palm
Kernel Oil edible grade covered under the
Bills of Entry as per Annexure-C and
Annexure-D to the show cause notice should
not be rejected. The petitioners were also
called upon to show cause as to why the
Bills of Entry should not be assessed on
the tariff rate of 100% Customs duty
corresponding to respective entry being
CTH 15132110 along with additional duty of
customs leviable under sub-section (5) of
section 3 of the Customs Tariff Act,1985
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(SAD) which was claimed as exempt vide
Notification No. 20/2006-CUS dated
01.03.2006 and Notification No.12/2012-
CUS dated 17.03.2012 in respect of the
import of the goods covered under the
Bills of Entry.
4. This Court [Coram: Hon'ble Ms. Justice
Harsha Devani (As Her Ladyship was then)
and Hon'ble Ms. Justice Sonia Gokani (As
Her Ladyship was then)] by order dated
18.09.2014 has admitted this petition
while deciding the issue of jurisdiction
to entertain this petition, wherein it is
observed as under:
"6. Having regard to the fact that
the very maintainability of the
petition has been called in
question on behalf of the
respondents, at the outset it
would be necessary to deal with
the said issue. For this purpose
it would be necessary to peruse
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the show cause notice issued by
the respondents, which prima facie
reveals that the same is based
upon the Circular No. 40/2001Cus.,
dated 13th July 2001, inasmuch as,
the record of the case indicates
that it is only the said circular
which provides for giving the
benefit of concessional rate of
duty on edible oil so long as the
oil is imported for edible
purpose. The learned counsel for
the respondent is not in a
position to point out any other
provision in law or any
notification of the Central
Government, which provides that
the benefit of the exemption
notification in question would be
based upon the end use of the
goods imported.
7. A perusal of the Chapter 15 of
the Tariff Act reveals that the
Palm Kernel Oil falls under Tariff
Item No. 1513 21 10. The first
supplementary note to Chapter 15
of the Tariff Act, reads thus: "In
this Chapter, "edible grade", in
respect of a goods (ie., edible
oil) specified in Appendix B to
the Prevention of Food
Adulteration Rules, 1955, means
the standard of quality specified
for such goods in that Appendix".
Thus, for qualifying for the
purpose of being considered to be
of edible grade, the goods
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specified in Appendix B of the
Prevention of Food Adulteration
Rules, have to meet with the
standard of quality specified for
such goods in the Appendix. Palm
Kernel Oil finds place at A.17.21
of Appendix B to the said rules.
The Prevention of Food
Adulteration Act, 1954 has been
repealed by the Food Safety and
Standards Act, 2006. The
Prevention of Food Adulteration
Rules, 1955 stand substituted by
the Food Safety and Standards
Rules & Regulations, 2011. The
standards prescribed in respect of
Palm kernel oil are under
Regulation No.2.2.1 (21) of the
Food Safety and Standards (Food
Products and Food Additives)
Regulations, 2011. A perusal of
the analysis reports of the goods
in question, clearly show that the
same meet with the requirements
laid down under Regulation
No.2.2.1 (21) for Palm Kernel Oil.
Thus, the record of the case
clearly demonstrates that the
goods imported by the petitioner
are of edible grade in terms of
the above supplementary note
inasmuch as the Food & Drugs
Laboratory has clearly opined that
the goods imported by the
petitioner from time to time
conform to the standards and
provisions laid down under the
Regulation No. 2.2.1 (21) of the
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Food Safety and Standards (Food
Products and Food Additives)
Regulations, 2011 for Palm Kernel
Oil and can be used only after
refining and conforming to the
standards as laid down under
Regulation No. 2.2.1 (16).
8. It may be noted that Regulation
2.2.1 (16) defines refined
vegetable oil and further provides
that refined vegetable oils shall
be obtained from the vegetable
oils enumerated thereunder. Palm
Kernel Oil finds mention at item
(xix) thereunder. It is not the
case of the petitioner that it is
importing goods answering the
description of 2.2.1 (16) but that
it imports Palm Kernel Oil (Edible
Grade) which falls within the
ambit of Regulation 2.2.1 (21). It
may be noticed that there is no
dispute with regard to the
description, classification and
use of the goods which are
imported by the petitioner. The
dispute raised by respondents is
that the goods, after being
imported are not used for the
purpose of converting the same
into edible oil, and therefore, in
view of the end use made by the
petitioners of the imported goods,
they are not entitled to the
benefit of the exemption
notification.
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9. The record shows that the
petitioner has been availing of
the benefit of the exemption
notification over a period of time
right from the year 2010, whereas
the show cause notice has been
issued for the first time in the
year 2013. On a bare reading of
exemption notification
No.12/2012cus. dated 17.3.2012,
prima facie, there is nothing to
show that for the purpose of
availing the benefit thereunder,
the end use of the all goods of
the description "crude and edible
grade" falling under the Chapter
or Heading or Subheading or tariff
as provided against serial no.57
of the said notification should be
for edible purpose. It is not the
case of the respondents that the
goods do not fall within the ambit
of serial no. 57 of the said
notification, but that since the
end use is not for edible purpose,
the same would not fall within the
ambit of the said serial number
and the petitioners would not be
entitled to the benefit of
exemption notification.
10. In the opinion of this court,
prima facie, on the plain reading
of Notification No.12/2012cus.,
the contention of the respondents
does not appear to have any legal
basis inasmuch as the exemption
notification is clear and takes
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within its ambit of all goods,
whether crude or of edible grade.
There is nothing in the exemption
notification which would warrant
an assumption that for the purpose
of falling within the ambit of
serial no.57 of the exemption
notification the end use of the
goods falling within the
description "crude and edible
grade" has to be for edible
purposes. It is by now well
settled by a catena of decisions
of the Supreme Court that in a
taxing statute there is no room
for any intendment, but regard
must be had to the clear meaning
of the words. The entire matter is
governed wholly by the language of
the notification. If the taxpayer
is within the plain terms of the
exemption, it cannot be denied its
benefit by calling in aid any
supposed intention of the
exempting authority. The exemption
notification as is well known
should be construed liberally once
it is found that the assessee
fulfils all the eligibility
criteria. In reading an exemption
notification, no condition should
be read into it when there is
none. If an assessee is entitled
to the benefit thereof, the same
should not be denied. Therefore,
the contention of the respondents
that the intent behind the
exemption notification to provide
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for lower rates of oil in public
interest has to be kept in mind
while construing the said
notification does not merit
acceptance. On a plain reading of
Notification No.12/2012 it is
clear that serial no. 57 thereof
provides for exemption to the
goods falling under Chapter or
Heading or Subheading or tariff
No.1508, 1509, 1510, 1512, 1513,
1514 or 1515 if the same answer
the description "All goods, crude
or edible grade". In the present
case, it is not even the case of
the respondents that the goods
imported by the petitioners do not
answer the said description. The
case of the respondents is solely
based upon the end use of such
goods, which is a condition that
is not provided under the said
exemption notification. Thus, in
essence and substance, the
respondents seek to read something
additional in the notification
which has not been provided
therein, which is not permissible
in law. Under the circumstances,
there is substance in the
contention advanced on behalf of
the petitioners that the impugned
show cause notice is based upon
the Circular No. 40/2001Cus.,
dated 13 th July 2001, which has
been quashed by this court. Under
the circumstances, the contention
that the present case is directly
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covered by the decision of this
court in the case Inter
Continental (India) v. Union of
India, 2003 (154) ELT 37 (Guj.) as
affirmed by the Supreme Court in
Union of India v. Inter
Continental (India), 2008 (226)
ELT 16, holding that the view
taken by the High Court that the
department could not, by issuing a
circular subsequent to the
notification, add a new condition
to the notification thereby either
restricting the scope of the
exemption notification or whittle
it down, merits acceptance. On a
totality of the facts emerging
from the record, it is evident
that the respondents seek to read
into the exemption notification
the requirements of the Circular
No.40/2001 Cus., dated 13.07.2001,
which has been set aside in the
above decisions.
11. As regards the contention
raised with reference to
Notification No.21/2002 dated
01.03.2002 that based on the
usage, different rates have been
prescribed under the duty
exemption notification, a perusal
of the said notification discloses
that wherever the Central
Government thought it fit to
impose a condition in respect of
any particular class of goods,
including a condition regarding
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the end use of such goods, it has
been specifically provided
therein. Whereas in respect of the
class of goods at serial no.57of
Notification No.12/2012, no
condition has been provided and as
such, no condition which has not
been stipulated in the exemption
notification can be read into it,
with reference to some other
notification.
12. In the aforesaid backdrop, it
prima facie appears that the
assumption of jurisdiction on the
part of the second respondent by
issuance of the impugned show
cause notice is without any legal
basis. The Supreme Court in the
case of Whirlpool Corporation v.
Registrar of Trade Marks, Mumbai
(supra) has held that the
jurisdiction of the High Court in
entertaining a writ petition under
Article 226 of the Constitution,
in spite of the alternative
statutory remedies, is not
affected, especially in a case
where the authority against whom
the writ is filed is shown to have
had no jurisdiction or had
purported to usurp jurisdiction
without any legal foundation. The
said decision would apply on all
fours to the present case.
Accordingly, the contention that
the petition is not maintainable
does not merit acceptance.
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13. As regards the decision of the
Supreme Court in the case of Union
of India v. Guwahati Carbon Ltd.
(supra) on which strong reliance
has been placed by the learned
counsel for the respondent, the
same does not lay down any
absolute proposition of law that
in no case, viz. even where by the
facts make out a case where the
exercise of powers by the
authorities is without
jurisdiction or where the
concerned authority has usurped
jurisdiction without any legal
foundation, the High Court should
not exercise its plenary
jurisdiction under Article 226 of
the Constitution of India. Each
case has to examined on its own
facts, and if on facts a case is
made out for exercise of powers
under Article 226 of the
Constitution in the light of the
principles propounded by the
Supreme Court in this regard, the
availability of an alternative
remedy will not bar the exercise
of powers under Article 226 of the
Constitution.
14. In the light of the above
discussion, the court is of the
view that the matter requires
consideration. Moreover, the
petitioners has been able to make
out a prima facie case and the
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balance of convenience also lies
in their favour inasmuch as if the
respondents are permitted to
proceed further they would have to
unnecessarily face lengthy
proceedings and undue harassment.
Under the circumstances, the
petitioners are entitled to
interim relief as prayed for vide
paragraph 19 (b) of the petition."
5. The petitioner no.1 is a company
engaged in the manufacture of various
personal care products, such as soap
products, fatty acids, fatty alcohol etc.
for which import of "crude palm kernel oil
edible grade" was made. The petitioner
imported "crude palm kernel oil edible
grade" falling under CTH 15132110
declaring description as Crude Palm Kernel
Oil (Edible Grade) paying NIL rate of duty
in terms of Serial No. 57 of the Customs
Notification No. 12/2012 dated 17.03.2012.
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SUBMISSIONS OF THE PETITIONER:
6. Learned Senior Advocate Mr. Mihir
Joshi for the petitioners submitted that
the Circular No.40/2001-CUS dated
13.07.2001 was issued by the Central Board
of Excise & Customs (For short "CBEC")
with a view to explain the meaning of
expression "Edible Grade" and "Edible Oil"
appearing in erstwhile Notification
No.17/2001-CUS dated 01.03.2001.
7. It was submitted that Circular
No.40/2001 was issued directing the
revenue authorities to read an end-use
condition into Notification No.17/2001 on
the premise that oils can be regarded as
"edible grade" only if they are ultimately
used for edible purposes as opposed to
industrial application.
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8. It was submitted that this Court in
case of Intercontinental (India) v. Union
of India reported in 2003 (154) ELT 37
while dealing with challenge to Circular
No.40/2001 held that condition of end-use
sought to be introduced through the
circular of CBEC would amount to re-write
the Exemption Notification which could not
have been done because under the Customs
Act, 1962 it was only the Central
Government which was empowered to either
issue or amend a Notification issued under
section 25 of the Customs Act. Therefore,
Circular No. 40/2001 was quashed and set
aside. The Hon'ble Supreme Court also
dismissed the appeal filed by the Revenue
against the judgment and order passed by
this Court quashing and setting aside
Circular No.40/2001.
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9. It was submitted that the petitioners
have been regularly importing crude palm
kernel oil of edible grade availing
benefit of Nil rate of duty as per
Notification No.21/2002-CUS dated
01.03.2002 (Sr.No.33A) and Notification
No.12/2012-CUS (Sr. No.57) which reads as
under:
Sr. No. Chapter of Description Standard Additional Condition
Heading or of goods rate duty rate no.
Sub-heading
or tariff
item
33A of 1508 All goods, Nil
Notfn. 1509 crude and
21/2002 1510 edible grade
1513, 1514
or 1515
57/12 of 1508 All goods, Nil
Notfn.12 1509 crude and
/2012 1510 edible grade
1513, 1514
or 1515
10. Learned Senior Advocate Mr. Joshi
invited the attention of the Court to
Supplementary Note 1 to Chapter 15 of the
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Customs Tariff Act, by which expression
"edible grade" has been defined as under:
"1. In this Chapter, 'edible grade',
in respect of goods (i.e. edible oil)
specified in Appendix B to the
Prevention of food Adulteration Rules,
1955 means the standard of quality
specified for such goods in that
Appendix."
11. Learned Senior Advocate Mr. Joshi
thereafter referred to Appendix-B to the
Prevention of Food Adulteration Rules,
1955 to point out that the standards of
edible palm kernel oil have been specified
at Sr No.A.17.21 of Appendix-B which reads
as under:
"A.17.21. - Palm Kernel oil means
oil obtained from sound palm
kernel of the fruits of 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 and
flavouring substances or mineral
oil. It shall conform to the
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following standards, namely":
Butyro-refractometer 35.3-
reading at 40oC 39.5
OR
Refractive Index at 40oC 1.4490-
1.4520
Iodine value (Wijs 10-23
method)
Saponification value 237-255
Unsaponifiable matter Not more
than 1.2
per cent
Acid value Not more
than 6.0
Further, if the oil is obtained by
the method of solvent extraction,
it shall be supplied for human
consumption only after refining
and shall conform to the standards
laid down under item A.17.15.
Additionally, it shall have Flash
point (Penske-Marten closed
method) not less than 250 degree
C."
12. It was submitted that the customs
authorities have drawn samples from each
and every consignment of the goods
imported by the petitioners and same were
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sent for testing to Customs Chemical
Examiner who has in each and every case of
import certified that the goods imported
by the petitioners were conforming to the
standards and provisions for palm kernel
oil laid down under the Food Safety and
Standards (Food Products and Food
Addictive) Regulation, 2011 (For short
"Regulations, 2011").
13. Reference was also made to statement
giving particulars of Bills of Entry of
the subject goods, sample numbers and
conclusion of the Food Analyst in the
Foods and Drugs Laboratory, Baroda.
Reference was also made to specimen copies
of the report of the Food Analyst and
that of Port Health Officer, Kandla
addressed to respondent no.3 -
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Commissioner of Customs, Kandla.
14. It was submitted that in the impugned
show cause notice, there is no dispute
about the correctness of any of the test
reports, opinion of the Port Health
Officer or the classification of the
subject goods under the Customs Tariff or
the fact that the subject goods were
conforming to the standards and provisions
of palm kernel oil under Prevention of
Food Adulteration Rules, 1955 or under
Regulations, 2011. The Prevention of Food
Adulteration Act, 1954 and the Rules made
thereunder were repealed with effect from
05.08.2011 and Food Safety and Standard
Act, 2006 and the Rules and regulations
made thereunder have been notified. It was
submitted that Regulation No.2.2.1(21) of
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the Regulations, 2011 is same as Entry
A.17.21 of the Appendix-B to the
Prevention of Food Adulteration Rules,
1955.
15. It was pointed out that search at the
factory premises of the petitioners was
conducted on 04.01.2013 at Mumbai and
Panchnama was drawn at Kandla on
03.01.2013. The petitioners preferred
Special Civil Application No.535 of 2013
for release of goods and by order dated
11.02.2013 passed by this Court, the goods
were released on executing bond of full
assessable value of goods and also
furnishing bank guarantee of 5% value
thereof.
16. It was submitted that samples drawn
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under the Panchnama were sent to Central
Food Laboratory, Pune along with test memo
dated 08.01.2013 to ascertain whether the
same conforms to the standard of quality
of edible grade or not. Director of
Central Food Laboratory, Pune rendered
opinion dated 17.01.2013 stating that
samples of the goods imported by the
petitioners conforms to the parameter of
palm kernel oil as per Food Safety and
Standards Act, 2006, Prevention of Food
Adulteration Rules, 1955 and Regulations,
2011, however for making it fit for human
consumption i.e. to make it edible, the
goods must go through the process of
refining and conforming.
17. Thereafter the impugned show cause
notice was issued on 27.06.2013 by
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respondent no.2 for alleged duty evasion
of Rs.464,00,61,628/- for wrongful
availment of exemption Notification
No.12./2012 by the petitioners. It was
submitted that by letter dated 22.02.2014
the petitioners requested respondent no.2
to withdraw the show cause notice in
light of the fact that the same is based
solely on Circular No.40/2001-CUS dated
13.07.2001 which has been quashed and set
aside by this Court and affirmed by the
Apex Court, as continuation of the
proceedings based on such circular would
amount to overreaching the orders passed
by the Court.
18. Learned Senior Advocate Mr. Mihir
Joshi referred to the convenience
compilation filed during the course of
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hearing and referred to the provisions of
the Prevention of Food Adulteration Rules,
1955 in Part-IX for Conditions of sale and
license as per Rule 49 of the Rules,1955
which includes condition no.13 which
provides for all edible oils, except
coconut oil, imported in crude, raw or
unrefined form shall be subject to the
process of refining before sale for human
consumption. It was therefore, submitted
that condition for sale of edible oil for
human consumption as provided in Rule 49
of the Rules,1955 carves out an exception
for import in crude, or raw or unrefined
form that it shall be subjected to the
process of refining before the sale for
human consumption. It was submitted that
however, when edible oil is not for human
consumption, condition no.13 in Rule 49
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would not be applicable and the contention
raised on behalf of the respondents that
crude palm kernel oil edible grade is
required to undergo the process of
refining to avail the benefit of exemption
under Notification No. 12/2012 is
contrary to the decision of this Court in
case of Intercontinental (India) v. Union
of India (supra) whereby Circular
No.40/2001 imposing similar condition was
quashed and set aside.
19. Reference was made to Rule 69-A
contained in Part-XV of the Rules,1955 for
solvent extracted oils and edible flour.
It was pointed out that Rule 69-A of the
Rules,1955 provides for restrictions on
use of solvent prescribing the tolerance
limits. It was submitted that from the
Hexane (Food solvent), the tolerance limit
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is mg.kg (ppm) of 5.00 for refined solvent
extracted oils and fats. It was submitted
that the standards prescribed in Rule 69-A
is met by the goods imported by the
petitioners.
20. Learned Senior Advocate Mr. Joshi
thereafter referred to Appendix B to the
Rules,1955 para. A.17.15, which stipulates
that "Refined Vegetable Oil" means any
vegetable oil which is obtained by
expression or solvent extraction of
vegetable oil bearing materials,
deacidified with alkali and/or physical
refining and/or by miscella refining using
permitted food grade solvents followed by
bleaching with absorbent earth and/or
activated carbon and deodorised with
steam. It was therefore, submitted that
the petitioners have imported crude palm
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kernel oil and not refined vegetable oil
which requires solvent extraction and
therefore, reliance placed by the
respondent on para A.17.21 of the Appendix
B which stipulates that palm kernel oil
means the oil obtained from sound palm
kernel or the fruits of oil palm (Elaeis
Ginenesis) tree by the method of
expression or solvent extraction, is not
correct. It was submitted that in case of
the petitioners, method of solvent
extraction is applied to obtain crude palm
kernel oil which meets with the parameters
prescribed in the aforesaid paragraph of
the Appendix B.
21. It was submitted that whether the palm
kernel oil is obtained by method of
expression or solvent extraction, it
remains in crude form, unless the same is
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refined only in context of solvent
extraction and if it is expressed then it
has to conform to all the parameters as
refined edible oil. It was further
submitted that as per the provisions of
the Rule, 1955 whether the oil is obtained
by expression or extraction has to be
refined except coconut oil which is
imported whether crude or refined but has
to be further refined , if the same is to
be used for human consumption.
22. Learned Senior Advocate Mr. Joshi
submitted that the respondent authorities
could not have assumed the jurisdiction to
issue the impugned show cause notice in
view of Circular No.29/97-CUS dated
31.07.1997 which is issued to clarify the
scope of term "vegetable oils of edible
grade" as per Notification No.11/1997
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dated 01.03.1997. It was therefore,
submitted that as the goods imported by
the petitioners being crude palm kernel
oil of edible grade, it is immaterial
whether it requires further process for
human consumption or not to avail the
benefit of exemption notification.
23. It was submitted that between the
period 2010-2014, case of the petitioners
would fall within the regime of Prevention
of Food Adulteration Regulation and the
Food Safety and Standards (Food Products
and Food Addictive) Regulation, 2011 which
contains para-materia provisions. In order
to compare both the Regulations, it was
pointed out that Regulation 16 of
Regulations, 2011 refers to refined
vegetable oil and Regulation 21 of
Regulations 2011 refers to palm kernel oil
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equivalent to para A.17.15 of Rules, 1955
pertaining to refined vegetable oil and
para A.17.21 of Rules, 1955 pertaining to
palm kernel oil of Appendix B containing
the same provisions.
24. It was submitted that Regulation
2.3.14(10) of Regulations, 2011 refers to
condition of sale which is equivalent to
condition no.13 of Rule 49 of the
Rules,1955.
25. Reference was also made to Blended
Edible Vegetable Oil specifications issued
by Bureau of Indian Standards which
provides that without processing, crude
edible oil is not fit for human
consumption but it is still edible grade
because others are chemical and they are
not edible grade at all.
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26. Reference was also made to The Pulses,
Edible Oilseeds and Edible Oils (Storage
Control) Order, 1977 wherein section 2(g)
of the said Order defines "Edible Oil"
means any oil used, directly or after
processing, for human consumption and
includes hydrogenated vegetable oil. It
was therefore, submitted that the crude
palm kernel oil imported by the
petitioners is not "edible oil" but it is
"edible grade" and to make it edible oil,
it would require further processing.
27. Reliance was placed on the decision of
Calcutta High Court in case of Supreme Oil
Industries Limited & anr. v. Special
Secretary, Finance (Taxation) Department,
Government of West Bengal & ors. reported
in 2007 SCC OnLine Cal 191 rendered in
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relation to rice bran oil of edible grade
wherein Hon'ble Calcutta High Court has
observed as under:
"3. The said writ application was
contested by the State-respondent
by filing affidavits-in-opposition
and the sum and substance of the
defence was that Edible Oil means
that category of Oil, which is fit
for direct human-consumption.
According to the State-respondent,
the Oil, which is made fit for
human-consumption by further
processing, cannot be said to be
"Edible" in order to get the
benefit of the Scheme.
xxx
11. After hearing the learned
Counsel for the parties and after
going through the materials on
record, we find that in the Scheme
there is no definition of "Edible
Rice Bran Oil". However, from the
materials on record, we find that
there are three grades of Rice
Bran Oil, namely, Refined Grade,
Raw Grade-1 and Raw Grade-2. The
Refined Grade of Rice Bran Oil is
fit for direct human-consumption
whereas Raw Grade-1 is of edible
variety and is rendered fit for
human-consumption after further
processing. On the other hand, the
Rice Bran Oil of Raw Grade-2
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category is not edible at all and
is used only for industrial
purpose.
12. The Rice Bran Oil Raw Grade-1
is used by the Vanaspati industry.
The various Vanaspati
manufacturers refer to the said
Rice Bran Oil of Raw Grade-1 is
Edible Rice Bran Oil. The
Directorate of Vanaspati,
Vegetable Oils and Fats of the
Government of India considers Rice
Bran Oil Raw Grade-1 obtained by
the method of solvent extraction
as Edible Oil permitted to be used
in the manufacture of Vanaspati as
would appear from the letter dated
March 22, 1995 issued by the said
Directorate. By a notification
dated March 1, 1997, the
Government of India granted Custom
Duty exemption in respect of
imported Vegetable Oil of Edible
Grade. In this context, a question
arose as to whether the same
covered only those Vegetable Oils,
which were fit for human-
consumption as imported or also
included the Vegetable Oil, which
is rendered fit for human-
consumption after further
processing. It further appears
that the Government of India by a
notification dated July 31, 1997
made it clear that the term
"Vegetable Oils of Edible Grade"
would cover Vegetable Oils, which
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was fit for human-consumption at
the time of import as also the
Vegetable Oils, which were
rendered fit for consumption after
processing. It was further
clarified that the benefit of Duty
Exemption would be admissible so
long as the imported oil was used
for Edible purposes even after
refining.
xxx
20. In our view, there being no
definition of edible oil within
the four corners of the Scheme,
the fact that a particular type of
oil cannot be used for immediate
direct human-consumption is
immaterial for the purpose of
interpreting the Scheme. Even the
report of the Jawaharlal Nehru
Technological University itself
shows that Rice Bran Oil Grade-1
is edible oil. Therefore, the
Special Secretary totally misread
those observations made in the
letter written by the Jawaharlal
Nehru Technological University
where Rice Bran Grade-1 Oil has
been described as edible oil
notwithstanding the fact that it
is not fit for direct human-
consumption."
28. Reliance was also placed on the
decision of Hon'ble Supreme Court in case
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of Commissioner of Commercial Taxes and
others v. Supreme Oil Industries Ltd.
(Order dated 29.04.2009 passed in Civil
Appeal No.2924 of 2009) whereby decision
of Calcutta High Court was confirmed by
the Hon'ble Apex Court.
29. Learned Senior Advocate Mr. Joshi also
relied upon the decision of Hon'ble
Karnataka High Court in case of Vishista
Solvent Oils Pvt. Ltd. v. Deputy
Commissioner of Commercial Taxes (Assts)
and others reported in (2001) 121 STC 492
(Kar) wherein it is held as under :
"7. In the case of solvent
extracted oil also, impurities are
removed, but the basic Character
of oil remains. Edible oil is a
genus which has both the species,
viz., refined and non-refined
beside the hydrogenated oil. The
Legislature has not contemplated
any difference while specifying
the edible oil in Part E in the
Second Schedule between refined
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and non-refined and same rate of
tax continues from April 1, 1988
for both the species. Thus, it can
be considered that in popular
sense the edible oil would include
refined oil as well as non-refined
oil. The Control Order 1977 also
covers within the sweep of edible
oil all those oils which are used
directly for human consumption or
which could be used after
processing. The Solvent Extracted
Oil, De-oiled Meal and Edible
Flour (Control) Order, 1967 has
regulated the production and sale
of solvent extracted oil and thus,
it is only after the process
through which, the solvent
extracted oil has to go, it could
be sold for human consumption,
i.e., after refining. It could not
have been the intention of the
Legislature, that refined edible
oil if subjected rate of tax, and
the petitioner has to pay higher
rate of tax on the non-refined oil
and then he is deprived of lesser
rate of tax. The Karnataka Sales
Tax Act has not defined edible oil
and even if the definition, in
common parlance, is taken into
consideration, then, it is the oil
produced from a particular seed
which is considered as edible oil.
While extracting oil from the oil
seed, different process of
extractions are employed. There
may be even a situation where the
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oil seed is crushed and no oil is
taken at the stage any by a
solvent extraction process, the
entire oil is extracted. In
another process, after crushing,
certain oil is obtained and the
residue remained in the oil cake
is extracted by solvent extraction
process. Even different machinery
used for expellers may have the
potentiality to extract different
percentage of oil. The oil
extracted from the expeller,
though could be used directly for
human consumptions, but contains
impurities. Similarly, the oil
extract from the oil cake also
contains impurities, more
particularly of hexane which is
the solvent and the oil so
obtained is known as solvent
extracted oil. The Control Order
prohibits sale of solvent
extracted oil for direct human
consumption. Solvent Extracted
Oil, De-oiled Meal and Edible
Flour (Control) Order, 1967
defines the solvent extracted oil
as vegetable oil in any form
obtained by the use of solvent. In
the public interest, the Control
Order prohibits the sale of such
solvent extracted oil directly for
human consumption unless it is
refined. Even if the oil which is
obtained from crushing of oil-
seed, the Legislature may restrict
to sell it unless it is refined.
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Hence some percentage of impurity
always remains even in the oil
which is obtained by the process
other than the solvent extract
process. The basic character of
the oil which is obtained from
crushing/expeller from the seed as
well as the oil obtained from the
oil cake remains the same, except,
to the extent of impurity of
hexane. It is for this reason that
there is a prohibition for direct
sale of such oil. Refining has
been considered as not changing
the basic character of the oil
and as such, the solvent extracted
oil cannot be considered as not
falling within the proper category
of edible oil."
30. Learned Senior Advocate Mr. Joshi
referred to Explanation (2) of
Notification No. 115/86-Central Excise-
Tariff dated 01.03.1986 to draw an analogy
wherein it is explained that rice bran oil
of edible grade means the rice bran oil
which conforms to the standards of quality
of edible oils specified for rice bran oil
in the Prevention of Food Adulteration
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Rules, 1955 under the Prevention of Food
Adulteration Act, 1954 as amended from
time to time. It was submitted that
similarly for crude palm kernel oil of
edible grade which conforms to the
standards of quality of edible oil
specified for palm kernel oil in the
aforesaid enactments would be entitled to
be classified as of edible grade falling
in Entry 33A of the Notification
No.21/2002 or Entry no.57 of the
Notification No. 12/2012 to avail the
benefit of exemption notification.
31. Learned Senior Advocate Mr. Joshi also
referred to the clarification issued by
the Ministry of Finance dated 09.04.1987
in F. No.332/55/86-TRU in relation to the
rice barn oil of edible grade wherein it
is stated as under:
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"5. Officers of the
Directorate of Vanaspati,
Vegetable Oils and Fats have
explained that standard under
Rule 5 (extracts of the
relevant standard A. 17.23 is
enclosed) for "articles of
food" and it will not be
reasonable to stipulate that
the raw materials for
vanaspati or the in-process
samples down for standard A.
17.23 is applicable to oil
sold for direct human
consumption is incorporated in
the standard itself. Moreover,
the standard for the marketed
product namely, vanaspati is
also laid down in the PFA
Rules separately and as such
there is no reason why In-
process samples should meet
the requirement under standard
A.17.23.
6. Rice bran oil is extracted
by solvent extraction method.
The raw oil can be categorised
into two different qualities,
namely, that fit for refining
for direct human consumption
or use in the manufacture of
vanaspati and the second grade
which may be used only for
industrial purposes like
manufacture of soap. The
standard for quality of oils
permitted for use in the
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manufacture of vanaspati is
stipulated in Rule 67(3) of
the PFA Rules according to
which the required standard is
the standard for "Raw Grade I"
for solvent extracted oils
laid down in Rule 9(2) of the
Solvent Extracted Oil Deoiled
Meal and Edible Flour Control
Order, 1967. Extract of the
relevant rules and the
standard are enclosed. Since
the notification lays down the
standard for raw material used
in the manufacture of
vanaspati, the term "edible
oil" used in the explanation
to the notification has to be
understood as the oil which
can be processed for edible
purposes as distinct from that
which is permitted for use in
industrial purposes only."
32. Learned Senior Advocate Mr. Joshi
therefore, submitted that the crude palm
kernel oil edible grade would fall in
Entry No.33A attracting Nil rate of duty
under the provisions of the Act of 1985 as
per Notification No. 21/2002-CUS dated
01.3.2002 which is equivalent to Entry
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No.57 attracting 2.5% of the duty as per
Notification No.12/2012-CUS dated
17.03.2012 instead of falling in Chapter
XV - 15132110 attracting 100% duty. It was
therefore, prayed that impugned show cause
notice being without jurisdiction may be
quashed and set aside.
SUBMISSSIONS OF THE RESPONDENTS
33. On the other hand learned advocate
Mr. Ankit Shah for the respondents
submitted that the impugned show cause
notice is not solely based upon Circular
No.40/2001 but it also pertains to mis-
declaration of the description of the
imported goods by the petitioners to avail
the wrongful exemption from customs duty.
34. It was submitted that crude palm
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kernel oil imported by the petitioners is
not fit for human consumption without
further process as per the test reports of
Central Food Laboratory, Pune and Port
Health Officer, Port Health Organisation,
Kandla and as per order passed by
Controller, Rationing and Director Civil
Supply, Mumbai. It was submitted that if
imported crude palm kernel oil after
processing is used for edible purpose then
only it would be entitled to duty
exemption at different rates under the
same tariff entry as per Notification
No.12/2012 dated 17.03.2012.
35. It was submitted that exemption
Notification No.12/2012 allows
concessional rate of duty to crude oil
under CTH 1513 when crude palm kernel oil
under CTH 1513 were imported for edible
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purpose. It was therefore, submitted that
the contention of the petitioners for
availing the benefit under exemption
notification that no end-use is required
to be mentioned is not tenable as such
exemption is available for usage of edible
oil and for that purpose crude oil which
requires further processing for human
consumption is not entitled to
concessional rate as per Notification
No.12/2012 and crude palm kernel oil
which is imported for industrial purpose
and not for edible purpose would not be
entitled to get exemption of concessional
rate of duty as such notification is
required to be read with Supplementary
Note 1 to Chapter 15 which refers to the
edible grade according to Appendix B to
Rules 1955 which provides that the end-use
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of the product is engrained into the
description itself and accordingly, the
crude oil of normal grade and edible grade
of oil meant for human consumption can
only be exempted.
36. It was further submitted that the
respondents have assumed the jurisdiction
for issuance of the show cause notice as
admittedly, the petitioners have imported
crude palm kernel oil for industrial
purpose and the goods imported by the
petitioners can only be used after
refining and conforming to the standards
as laid down in Regulation 2.2.1(16) of
Regulations,2011 and additional
requirement for flash point not less than
250°C and hexane content not more than 5
ppm.
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37. Learned advocate Mr. Shah also
referred to the opinion of Food Analyst at
page 57 of the paper book which clearly
provides that the imported goods can be
used only after refining and conforming to
the standards as laid down under
Regulation 2.2.1(16) of the Regulations,
2011.
38. It was therefore, submitted that by no
stretch of imagination it can be said that
the goods imported by the petitioners is
entitled to notification for concessional
rate of duty.
ANALYSIS:
39. Considering the submissions made by
the learned advocates for the parties,
short question which arises for
consideration is whether the petitioners
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are entitled to the benefit of
Notification No.12/2012 by which crude
palm kernel oil edible grade imported by
the petitioners for industrial purpose
would be subject to levy of customs duty
at Nil rate or reduced rate or not.
40. The customs duty is leviable as per
the provisions of section 12 of the
Customs Act, 1962 (for short 'the Act') on
all goods imported into or exported from
India. When such goods enter the
territorial waters of India and the Act
does not differentiate the taxable events
for different purpose. As per section 12
of the Act, customs duty is levied at such
rate as may be specified under the Tariff
Act. The customs duty is chargeable upon
the assessment or quantification of the
amount of duty payable under sections 14
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and 15 of the Act pertaining to valuation
of goods for the purpose of assessment and
the date of determination of rate of duty
and tariff valuation of imported goods
respectively.
41. Section 25 of the Act provides for
power to grant exemption from duty and
sub-section(1) of section 25 of the Act
empowers the Central Government to issue
notification in the official gazette if it
is necessary in the public interest,
granting exemption either absolutely or
subject to such conditions to be fulfilled
before or after clearance as may be
specified in the notification in relation
to specified goods either wholly or partly
duty of customs. Sub-section (2) of
section 25 of the Customs Act provides for
passing of special-order granting
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exemption from payment of duty for reasons
to be stated in such order regarding any
goods, of strategic or secret nature or
for charitable purpose on which duty is
leviable. Sub-section (3) of section 25 of
the Customs Act provides for levy of duty
on specified goods at a rate expressed in
form or method different from form or
method in which the statutory duty is
leviable. As per sub-section (4) of
section 25, the notification issued under
sub-section (1) shall come into force on
the date of its issue by the Central
Government for publication in Official
Gazette unless otherwise provided which
assumes importance in view of the
provisions of section 159 of the Act which
specifically provides that such
notification as may be issued under
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section 25 of the Act shall be laid before
each House of Parliament and the period
for which it should be so laid and
permitting modification by the House.
Hence on conjoint reading of sections 25
and 159 of the Act it is clear that
notification issued under section 25 of
the Act has a force of a statutory levy.
So far as the import of crude palm kernel
oil edible grade by the petitioners is
concerned, same is covered by Entry No.33A
under CTH 1513 availing Nil rate of duty
as per Notification No.21/2002-CUS dated
01.03.2002 which is equivalent to Entry
No.57 as per Notification No.12/2012-CUS.
42. Entry No.33A as per Notification
No.21/2002 refers to all goods, crude and
edible grade prescribing Nil rate whereas
Entry No.33B provides for all goods,
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refined and edible grade prescribing rate
of duty at 7.5%. Entry No.33A is inserted
by Notification No.42/2008-CUS dated
01.04.2008 by amending Notification
No.21/2002.
43. Entry No.57 in Notification No.12/2012
is same as Entry No.33A as amended by
Notification No.21/2002. However by
Notification No.2/2013-CUS dated
23.01.2013, rate of duty is prescribed at
2.5% instead of Nil rate of duty.
Therefore, the petitioners were paying the
duty of 2.5% instead of 7.5% after 2013
instead of Nil rate of duty.
44. Section III of the Tariff Act
includes Chapter 15 pertaining to Animal
or Vegetable Fats and Oils and their
Cleavage products; prepared edible fats;
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animal or vegetable waxes and
Supplementary Note 1 in the said Chapter
explains "edible grade" in respect of
goods i.e. edible oil specified in
Appendix B to the Prevention of Food
Adulteration Rules, 1955 means the
standard of quality specified for such
goods in that Appendix.
45. As per the interpretation of the
respondents, crude palm kernel oil would
fall under CTH 15132110 attracting 100%
rate of duty as it is not fit for human
consumption though it may be of an edible
grade. Therefore, it is necessary to refer
to Appendix B to Prevention of Food
Adulteration Rules, 1955 which is
extracted here-in-above.
46. Para no. A.17.21 Appendix B pertains
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to palm kernel oil means oil obtained from
sound palm kernel of the fruits of oil
palm (Elaeis Guineensis) tree by method of
expression or solvent extraction in the
prescribed method therein. Similar
provision as per Regulation, 2011 which
is equivalent to palm kernel oil is in
regulation 2.2.1(21).
47. Report of the Food Analyst, Port
Health Officer placed on record clearly
shows that the goods imported by the
petitioners i.e. crude palm kernel oil
edible grade conforms the standard and
provisions laid down in regulation
2.2.1(21) of the Regulation, 2011 with a
rider that oil can be used for human
consumption only after refining and
conforming to the standards as laid down
under Regulation 2.2.1(16) and additional
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requirement for flash point not less than
250°C and hexane content not more than 5
ppm for human consumption.
48. Thus, as per the Supplementary Note 1
to Chapter 15 of the Tariff Act, crude
palm kernel oil edible grade imported by
the petitioners fulfills the criteria
prescribed in Appendix B which is
equivalent to Regulation 2.2.1(21) of the
Regulations, 2011. Similarly, the
Director, Central Food Laboratory, Pune
has also conveyed correction in the report
placed on record which shows that the
imported crude palm kernel oil edible
grade by the petitioners conforms the
parameters of palm kernel oil as per
Regulations, 2011. However, it is
categorically stated that for making it
fit for human consumption i.e. edible, it
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is required to be refined further. Relying
upon such opinion, the respondents have
issued the impugned show cause notice
calling upon the petitioners to show cause
as to why the goods imported by the
petitioners should not be subjected to
100% customs duty as the crude palm kernel
oil though claimed as edible grade is not
fit for human consumption without further
process of refinement of such goods under
CTH 15132110 as the petitioners have
imported such goods for manufacture of
industrial fatty acids for manufacture of
soap, etc and therefore, it is admittedly
for commercial purpose and not for human
consumption.
49. The stand taken by the respondents was
that Circular No.40/2001 provides that
crude palm kernel oil imported of edible
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grade is not liable to benefit of
exemption notification unless it is
required for further process. Vires of
such notification was challenged before
this Court in case of Inter Continental
(India) v Union of India (supra) which was
quashed and set aside by this Court
wherein after considering the provisions
of Prevention of Food Adulteration Act,
1954 and the requirement of end-use
prescribed in para no. 6(c) of Circular
No.40/2001 it was observed as under:
"15 As can be seen from
Notification No.17, the Government
was conscious of the provision of
Section 25(1) of the Act and has
specifically prescribed condition
in relation to some entries in
column No.6 of the Table. It is
not necessary for us to refer to
various conditions specified in
the Annexure to the Notification
but by way of illustration entry
at Sr.No.43 will be sufficient to
show how provisions of Section
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25(1) of the Act operate. In
column 6 pertaining to conditions,
condition No.6 has been prescribed
for entry No.43, which deals with
" wine, for use as sacramental
wine" and the rate of concessional
duty is 35%. Condition No.6 in the
annexure reads; " if the importer
furnishes undertaking to the
Deputy Commissioner of Customs or
Assistant Commissioner of Customs,
as the case may be, that the wine
shall be used as sacramental
wine". Therefore, a condition
pertaining to a stage after
clearance has been imposed as
provided in the section.
Similarly, condition Nos. 12, 17,
18 and 40 are the instances of
situations where end-use is
stipulated as being pre-requisite
for claiming exemption as part of
the Notification No.17. In fact,
in condition No.40, a period of
two years is available from the
date of importation or within such
extended period as the officer may
allow, in which the importer is
required to produce necessary
certificate.
16 In relation to entry at
Sr.No.29, no condition is
prescribed. Similarly no condition
is prescribed in relation to entry
at Sr.No.34 or even in entry
No.28. If the Notification No.17
has not provided for any
condition, in our opinion,
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subsequent circular cannot impose
such a condition as the same would
tantamount to rewriting
Notification No.17 or in other
words legislating by circular,
which is not permissible in law.
As can be seen from the relevant
provisions with special reference
to Section 25 read with section
159 of the Act, a notification
under section 25 of the Act
requires publication in the
official gazette as well as
requires tabling before both the
Houses of Parliament and if that
exercise has been carried out
without any condition being
imposed in the Notification No.17
it would not be permissible to
permit revenue to impose such
condition by way of circular. If
the revenue is allowed to
undertake such an exercise, the
requirement of publication in
official gazette and laying a
notification before each House of
the Parliament would become
nugatory and such a course of
action is not envisaged by the
Act. It would give licence to the
executive to bypass/override the
legislature and cannot be
countenanced.
17 Lot of debate took place in
relation to the actual wordings
and the meaning of entries 28, 29
and 34 of Notification No.17. The
said entries read as under:
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Sr. Chapter of Description Standard Additional Condition
No. Heading No. or of goods rate duty rate No.
sub-heading No.
28 15 Edible oils 85% - -
falling
under
Heading
No., 15.08,
15.11,
15.12,
15.13,
15.14 or
15.15
29 15 All goods 35% - -
(other than
edible oils
falling
under
heading
No. 15.07,
15.08,
15.09,
15.10,
15.11,
15.12,
15.13,
15.14 or
15.15
x x x x x
34 1511.10 Crude palm 75% - -
oil and its
fractions, of
edible
grade, in
loose or
bulk form
18 As can be seen from the
entries, entry no.28 deals with
Edible oils falling under heading
viz. Ground-nut Oil, Palm Oil,
Sunflower seed, Safflower or
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cotton seed oil, Coconut oil and
others as mentioned in 15.13,
Rape, colza or mustard oil and
other fixed vegetable fats and
oils. On the other hand, entry
No.29 talks of All goods (other
than Edible oil) falling under
various heads mentioned in entry
No.28 as well as headings dealing
with Soya-bean oil, Olive oil and
other oils obtained solely from
olives. If we compare entry No.34
dealing with crude palm oil and
its fraction of Edible grade in
loose or bulk form and column No.2
of the Table which shows sub-
heading 1511.10 it can be observed
that the said sub-heading 1511.10
is absent in entries 28 & 29. In
view of this situation it is
apparent that entry No.34 carves
out an exception to Entry No.28
and has no relevance with Entry
No.29. Entry No.28 deals with
Edible oils falling under various
headings and sub-headings and one
of the headings is 15.11 which
deals with Palm oil and its
fractions whether or not refined
but not chemically modified, while
sub-heading 1511.10 deals with
Crude oil i.e. Crude palm oil.
When one reads entries 28 and 34
in juxta position, it is apparent
that entry No.28 pertains only to
edible oils falling under
specified sub-headings and entry
No.34 is an exception carved out
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from that entry as regards Crude
palm oil of edible grade. In
relation to entry No. 29, it
pertains to All goods other than
edible oils i.e. goods envisaged
by entry No.29 are those which do
not fall either in entry No.28 or
in entry No.34. If that be so, we
have no doubt and that is the
position, it is not possible to
accept the contention of revenue
that goods falling under entry
No.29 should not be made liable to
concessional rate of duty i.e. 35%
but should be treated as falling
under entry No.34, if the importer
fails to establish that though the
goods are other than edible oils
at the time of import, yet
importer should establish that
they shall not be refined or
processed to make them of edible
grade, in other words, the
importer should establish end use
to the satisfaction of the proper
officer. There is one more reason
why this course of action proposed
by the revenue cannot be accepted.
As can be seen from comparison of
entry No.29 and entry No.34,
though there are various types of
oils mentioned in entry No.29 only
Crude palm oil of edible grade is
brought under entry No.34 and the
circular is only in relation to
the said item viz. Crude palm oil.
Thus, in effect All goods (other
than edible oils) falling under
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different headings except 15.11
can be imported without any such
condition of end-use being imposed
upon an importer. Only in relation
to heading No.15.11 relating to
Palm oil, the condition is being
imposed upon an importer to
establish the end-use for claiming
benefit of concessional rate of
duty under the Notification No.17.
There is no logic, no rationale,
much less any basis for such a
treatment to only one category of
oil which otherwise falls under
the same classification under the
Tariff Act.
19. Mr.Patel during the course of
discussion referred to the
provisions of Prevention of Food
Adulteration Act,1954 as well as
Rules thereunder with special
reference to Section 6 of the said
Act and Rule 5 which defines
standards of quality on various
articles as specified in Appendix
"B" to the Rules. Our attention
was invited to various standards
set out in Appendix "B" to urge
that only slight difference was
there between the different kinds
of Oils for the purpose of
ascertaining whether oil was of
edible grade or not. It is not
necessary for our purpose to deal
with the various technical aspects
laid down in Appendix "B" for the
simple reason that it is an
admitted position between the
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parties that when the imported
goods entered territorial waters
of India, the Boarding Officer had
drawn samples of the product for
test in the presence of the
representative of the Master of
Vessel, the Shipping Agent and
representative of the Importer;
and such samples had been sent for
testing to the Chemical Examiner,
Customs House, Kandla, who has
opined that the same does not
conform specification for Crude
Palm oil (Edible grade) as per IS-
8323-E-1977. It appears that the
said sample was also forwarded
through the Referal Hospital &
Community Health Centre, Mundra-
Kutch, to the Public Analyst, Food
& Drug Laboratory, Vadodara for
opinion. He has opined to the
effect that the sample conforms to
the standards and provisions laid
down under the Prevention of Food
Adulteration Rules, 1955, for Palm
Oil and cannot be used as such for
human consumption. Therefore, once
the competent authority who is
technically qualified to tender
opinion in relation to the
technical standards prescribed
under the provisions of Food
Adulteration Act and Rules
thereunder has tendered his
opinion it would not be open to
any one to take a contrary stand,
unless and until such technical
opinion is displaced by specific
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and cogent evidence in the form of
another technical opinion. Merely
by approaching the matter by
stating that the goods could be
converted into Palm oil of edible
grade by carrying out certain
processes, the Respondent No.3 who
is an officer of the department
cannot displace the report of
technical expert, nor can he
insist that inspite of such report
the importer must establish that
end-use of the product shall not
be other than one as regards entry
in which the goods admittedly fall
at the time of import.
20. The impugned circular No.40/01
in paragraph 6(c) requires that
the end-use certificate shall have
to be produced by the importer
from the Assistant/Deputy
Commissioner of Central Excise
having jurisdiction over the
factories of soap manufacturers
(or other industrial application
for which the vegetable oil is
claimed to have been used) and
such certificate is produced
before the customs authority
within a period of three months or
a period as may be extended by the
Commissioner of Customs on being
requested by the importer. It is
further stated in the said sub-
paragraph that on failure of
importer to produce such
certificate within a specified
time frame immediate recovery
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action of differential amount be
initiated. The earlier paragraph
i.e.sub-paragraph (b) of paragraph
6 of the circular states that even
after the report of testing of
vegetable oil and finding that the
consignment is not conforming to
the standards prescribed under the
PFA Act and Rules thereunder, the
provisional assessment may be made
at the concessional rate of duty
and the goods may be permitted to
be moved on execution of bond for
establishing end-use of the oil
for industrial use as claimed and
the bond shall cover the
differential duty liability
between the industrial and edible
grade oil. Further more, depending
upon whether the import is by an
actual user manufacturer or trader
security/bank guarantee amounting
to 25% or 100%, as the case may
be, of the bond value shall be
taken. Mr.Patel, learned Counsel
appearing on behalf of the
respondents submitted in relation
to this part of the circular that
these safeguards have been
prescribed so as to uniformly
assess persons importing oils for
industrial use only and to prevent
misuse of imported oils being used
for edible purpose after
processing, on payment of
concessional rate of duty.
According to him, in case of a
trader, if the goods are sold to
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'A' and further 'A' sells those
goods to 'B', 'B' to 'C', 'C'to
'D' and so on, the importer trader
shall have to produce the end-use
certificate from the last such
purchaser in the chain and the
certificate shall have to be from
the Assistant/Deputy Commissioner
of Central Excise having
jurisdiction over last such
purchaser. It is beyond our
comprehension as to how can a
trader be expected to follow the
goods which he has already sold
off and which might change hands
in series of transactions. To
expect such an importer trader to
produce a certificate of end-use
from an officer of Central Excise,
having jurisdiction over the
purchaser who is the last in the
chain of transaction is casting a
burden which if not impossible is
impracticable to say the least. At
least such a requirement/condition
cannot be read in Notification
No.17 by virtue of the impugned
Circular No.40/2001."
50. Hon'ble Apex Court by judgment and
order dated 23.04.2008 rendered in Civil
Appeal No.6529 of 2002 upheld the
aforesaid decision of this Court by
observing as under:
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"4. It may be mentioned here that
the samples taken from the
imported crude oil wen sent for
testing to the Chemical Examiner,
Customs House, Kandla and Public
Analyst, Foor & Drug Laboratory,
Vadodara for their opinion to
ascertain as to whether the oil is
fit fo human consumption or not.
Both the laboratories opined that
the imported oil was not fit fo
human consumption.
5. The High Court by the impugned
order has accepted the writ
petition by holding that the
Central Board of Excise and
Customs could not, by issuing a
circular subsequent to the
issuance of the notification, add
a new condition thereby
restricting the scope of the
exemption notification. It was
held that the impugned Circular
No. 40/2001-Cus., dated 13-7- 2001
being contrary to the Notification
No. 17/2001-Cus., dated 1st March,
2001 could not be sustained as it
cannot override the said
notification. In para 16, the High
Court observed as under:
"In relation to entry at Sr.
No. 29 no condition is
prescribed. Similarly no
condition is prescribed in
relation to entry at Sr. No.
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34 or even in entry No. 28. If
the Notification No any
condition, in our opinion,
subsequent circular cannot
impose such a condition as the
same would No. 17 has not
provided for tantamount to
or in other words legislating
by circular, which is not
permissible in law. As can be
seen from the relevant
provisions with special
reference to Section 25 read
with Section 159 of the Act, a
notification under Section 25
of the Act requires
publication in official
gazette as well as requires
tabling before both the Houses
of Parliament and if that
exercise has been carried out
without any condition being
imposed in the Notification
No. 17 it would not be
permissible to permit revenue
to impose such condition by
way of circular. If the
revenue is allowed to
undertake such an exercise,
the requirement of publication
in official gazette and laying
a notification gazette and
laying before each House of
the Parliament would become
nugatory and such a course of
action is not envisaged by the
Act. It would give licence to
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the executive to
bypass/override the
legislature and cannot be
countenanced."
6. We entirely agree with the view
taken by the High Court that the
department could not, by issuing a
circular subsequent to the
notification, add a new condition
to the notification thereby either
restricting the scope of the
exemption notification or whittle
it down."
51. In view of above settled legal
position, the respondents could not have
assumed the jurisdiction to issue the
impugned show cause notice on the same
subject matter considering the end-use of
the goods imported by the petitioners
which was struck down by the Court being
part of the Circular No. 40/2001. As held
by this Court and upheld by the Hon'ble
Apex Court, the Revenue was not held to be
justified for treating the goods falling
under Entry 29 equivalent to Entry 33A and
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Entry 57 in facts of the case and made
liable to concessional rate of duty should
be treated as entry falling under CTH
15132110 applying 100% of the customs duty
as the petitioners have admittedly
imported the goods which is not fit for
human consumption as crude palm kernel oil
edible grade which requires further
processing and refining to make it edible
and unless the petitioners establish the
end-use to the satisfaction of the
respondents, the insistence for levy of
customs duty on the basis of end-use for
claiming benefit of concessional rate of
duty under Notification No.12/2002 read
with Notification No.21/2002 cannot be
sustained.
52. Reliance placed on behalf of the
petitioners on Circular No.29/97-CUS dated
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31.07.1997 also throws light with regard
to word "edible grade" used in Chapter 15
and Entry No.33A/57 in notifications of
exemption where it is clarified that the
term "vegetable oil of edible grade"
appearing in Notification No.11/97 i.e. as
to whether the term will cover only those
vegetable oils which are fit for human
consumption as it is imported or it will
also include the vegetable oils which are
not fit for human consumption at the time
of import but will be fit for human
consumption after further processing as
under:
"3. The matter has since been
examined in consultation with the
Ministry of Food, Department of
Food, Directorate of Vanaspati,
Vegetable Oils and Fats, Ministry
of Civil Supplies, Consumers
Affairs and Public Distribution
and Department of Economic
Affairs. It is clarified that the
term 'vegetable oils of edible
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grade' will cover vegetable oils
which are fit for human
consumption at the time of import
as also the vegetable oils which
are fit for human consumption
after further processing. The
benefit of duty exemption is
admissible so long as the oil
imported is used for edible
purposes, even after refining.
Pending cases of assessment may be
finalised on the basis of above
clarification."
53. From the above clarification, it is
clear that benefit of duty exemption is
admissible so long as oil imported is of
edible purpose as the term "vegetable oils
of edible grade" will cover the vegetable
oils which are fit for human consumption
at the time of import as also vegetable
oils which are not fit for human
consumption requiring further processing
making fit for human consumption.
54. Therefore, in facts of the case, at
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the time of importation it is to be seen
as to whether crude palm kernel oil is of
edible grade or not. Therefore, moot
question to be considered is as to whether
crude palm kernel oil imported by the
petitioners was of edible grade or not and
it is not material as to whether it
requires no process or it requires further
process to make it fit for human
consumption.
55. During the course of hearing, the
learned Senior Counsel Mr. Joshi for the
petitioners referred to the provisions of
Prevention of Food Adulteration Act, 1954
and the Rules which is substituted by Food
Safety and Standard Act, 2006 and Rules
and Regulations,2011 as well as Indian
Standard pertaining to blended edible
vegetable oils- specifications and the
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Pulses, Edible Oilseeds and Edible oils
(Storage Control) Order 1977 to
demonstrate that crude palm kernel oil
imported by the petitioners is of edible
grade as per specifications prescribed in
para no. 2.2.1(21) of the Regulations,
2011 as compared to para 2.2.1(16) which
refers to refined vegetable oil which
includes palm kernel oil at item No.(xix).
It was pointed out from the record that
crude palm kernel oil imported by the
petitioners is obtained by the method of
expression or solvent extraction and
method of expression is as per Indian
Standard Blended Edible Vegetable Oils-
Specifications which provides definition
of edible oil and means any oil used,
directly or after processing for human
consumption and includes hydrogenated
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vegetable oil. However, it was pointed out
that edible oil is different than crude
edible grade oil which may be subject to
the process of refining before sale for
human consumption. Reference was also
made to Food Safety and Standards
(Prohibition and Restriction on Sales)
Regulations, 2011 which includes
restrictions relating to conditions for
sale as provided in regulation 2.3.14
which includes clause 10 which refers to
all edible oils, except coconut oil, olive
oil imported in crude, raw or unrefined
form shall be subjected to the process of
refining before sale for human
consumption. It was, therefore, made clear
that edible oil is different than crude
oil of edible grade which may require
further processing to make it edible oil
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whereas Entry No. 33A/57 in notification
applicable for exemption refers only to
edible grade and not edible oil.
56. Reliance placed on behalf of the
petitioners on decision of Calcutta High
Court in case of Supreme Oil Industries
Limited & anr.(supra) pertaining to rice
bran oil in similar controversy as to
applicability of rate of duty on edible
grade or edible rice bran oil is also
applicable to consider the issue in this
petition relating to crude palm kernel oil
edible grade as the Hon'ble Calcutta High
Court after considering that there being
no definition of edible oils within the
four corners of the scheme and the fact
that a particular type of oil cannot be
used for immediate direct human
consumption, it was held that it was
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immaterial for the purpose of interpreting
the scheme. The Hon'ble Supreme Court in
case of Commissioner of Commerical Taxes
and others v. Supreme Oil Industries Ltd
and others (supra) has upheld the order
passed by the Calcutta High Court in
reference to the Scheme of the West Bengal
Sales Tax Act, 1994 observing as under:
"2. In 1994, Government of West
Bengal introduced an incentive
scheme known as West Bengal
Industrial Promotion (Assistance to
Industrial Units) Scheme, 1994,
(hereinafter referred to as the said
'Scheme'). The Scheme provided for
financial assistance to Industrial
Units manufacturing goods enumerated
in 'Schedule A' to the Scheme. That
Schedule contains" Edible Rice Bran
Oil" as one of the Items which made
the claim for assistance admissible
is a registered dealer under West
Bengal Sales Tax Act, 1994.
Respondent No. 1 made an application
in Form-1 claiming assistance under
the said Scheme in respect of
periods mentioned in Synopsis- B.
Respondent No. 1 claimed that "Rice
Bran Oil Raw Grade-I" manufactured
by it formed part of "Edible Rice
Bran Oil" and as such it was
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entitled to ninety per cent refund
in respect of tax collected on sale
in terms of the said Scheme. The
dispute ultimately came before the
High Court by way of Writ Petition
as the Special Secretary, Finance
Department, Government of West
Bengal rejected Grade-
herein holding that "Rice Bran Oil
Grade-1, manufactured by respondent
No. 1 herein was not "Edible Rice
Bran Oil" as the manufactured
product required further processing
before it became fit for human
consumption. The learned Single
Judge set aside the order of the
Special Secretary and directed the
matter to be heard de novo in
accordance with law. The view
earlier taken by the Special
Secretary came to be re-iterated
vide Order dated 16th September,
herein to move the High Court in
Writ Petition No. 2170 of 2002,
which came to be dismissed. The
dismissal of the writ petition was
reversed by the Division Bench of
the High Court vide the impugned
judgment, hence this Civil Appeal is
filed by the Department.
3. Apart from the reasons given by
the Division Bench, we find that the
Scheme 1994 came to be enacted in
view of the fact that 16 Units
manufacturing Rice Brand Oil of Raw
Grade-I in the State of West Bengal
were facing acute financial problems
and in order to alleviate those
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financial problems the State decided
to give financial assistance for the
very existence of the Units set up
prior to 1994. In this connection we
may point out that in this case we
are concerned with three categories
of Rice Bran Oil. The first category
is Rice Bran Oil of Raw Grade-I
which goes into the manufacture of
vanaspati. The second category is
Rice Bran Oil of Raw Grade-II not
fit for human consumption. It goes
in industrial uses. The third
category is Rice Bran Oil Refined
Grade which is fit for direct human
consumption, as such. On enquiries
we were informed that there is no
Unit in the State of West Bengal
which was in the manufacture of Rice
Bran Oil of Refined Grade in 1994
when the Scheme stood enacted.
Since, we are concerned with the
incentive Scheme, we have to give
weightage to the object behind
enactment of 1994 Scheme. The object
appears to be to give incentive to
those Units set up prior of 1994
which were in the manufacture of
Rice Brand Oil of Raw Grade-I alone.
We have been taken through number of
enactments, namely, Food
Adulteration Act, Essential
Commodities Act and the material
indicating how the trade perceives
Rice Brand Oil of Raw Grade-I and we
find that the said product is
perceived by the trade as Edible
Oil."
57. In view of above analysis, it cannot
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be said that only because crude palm
kernel oil edible grade imported by the
petitioners requires further processing
for making it edible for human
consumption, it would be excluded from
Entry 33A/57 of the Exempt Notifications
which refers to all oils, crude or edible
grade attracting Nil/reduced rate of duty
by classifying the product as palm kernel
oil under Chapter 15132110 attracting 100%
custom duty and respondents could not have
assumed jurisdiction to read condition of
further processing for end use of the
crude palm kernel oil edible grade to make
it edible oil for human consumption.
58. In view of foregoing reasons, the
impugned show cause notice is liable to be
quashed and set aside and is accordingly
quashed and set aside. Rule is made
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absolute to the aforesaid extent. No order
as to costs.
59. Civil Application for fixing date of
hearing would not survive and stands
disposed of accordingly.
(BHARGAV D. KARIA, J)
(PRANAV TRIVEDI,J)
RAGHUNATH R NAIR
