Sheel Chand Agrolls Pvt. Ltd. vs C.C. (Preventive), New Delhi

Appeal is preferred against order-in-original dated 29.4.2009 in terms of which customs duty demand of Rs.36,17,303/- was confirmed holding that

appellant was not eligible for the benefit of Notification No.26/2000-Cus dated 1.3.2000. Penalty of equivalent amount was also imposed on the

appellant under Section 114(A). Penalties of Rs.10 lakhs on Shri Mohan Goel, Managing Director, M/s Sheel Chand Agrolls Pvt. Ltd. and Rs.2 lakhs

on Shri Surendra Bhardwaj and M/s Mahadev Overseas were also imposed under Section 112(a) of the Customs Act, 1962.

The facts of the case are as under:

The appellant imported a consignment describing it as ""RBD Palmolein Mixture"" from Sri Lanka and filed Bill of Entry dated 24.6.2004 claiming the

benefit of exemption Notification No.26/2000-Cus. dated 1.3.2000 under Inda-Sri Lanka Free Trade Agreement (ISFTA) The goods were examined

and representative samples drawn were sent for test to the Central Food Laboratory, Ghaziabad which gave the following test report:

The sample conforms to the standards of R B D Palmolein laid down under Item No.A17.20 read with Item No.A17.15 for refined vegetable

oil of Appendix 'B' of the PFA Rules (1955). The label declarations may be examined at your end as the manufacture's label has not been

provided.

Based on the test report and observing that the goods were directly sold to consumers and end-user without refining which showed that the goods

were edible and therefore could not have been classifiable under CH 1518 which inter alia covers inedible mixtures or preparation of animal or

vegetable fats or oils, the adjudicating authority held that the goods were misdeclared and were actually classifiable under CH 1511 and thus had not

undergone a change of classification at the four digit level as a result of any processing in Sri Lanka, consequently ,condition stipulated under Rule 7(b)

of the Customs Tariff (Determination of Origin under the Free Trade Agreement between the Democratic Socialist Republic of Sri Lanka and

Republic of India) Rules, 2000 [D.O.O. Rules, 2000] was not satisfied and therefore concessional rate of duty under Notification No.26/2000-Cus was

not available. Accordingly, differential duty demand was confirmed and the penalties were imposed as above.

The appellant has contended that -

(i) what was imported was RBD Palmolein Mixture which contained 80% RBD Palmolein Oil imported into Sri Lanka and 20% coconut oil of Sri

Lankan origin. The exporter had obtained permission from the Board of Investment of Sri Lanka to export RBD Palmolein Mixture to India under

brand name SOGO cooking oil mixture subject to condition that the product should meet the criteria laid down in the Indo-Sri Lanka Free Trade

Agreement (ISFTA) to qualify for tariff concessions granted under the said agreement. In the application submitted to Sri Lankan Custom it had

declared the goods to be 80% imported Palmolein mixed with 20% coconut oil in the mechanized process claiming classification to be under CH 15.18

due to oversight instead of 15.17 and the Customs opinion dated 19.5.2004 valid for six month mentioned the goods classification under CH 1517.90. It

was just an oversight that the commercial invoice issued by the exporter also mentioned CTH 15.18 instead of CTH 15.17.

(ii) The adjudicating authority on its own rejected the finding of the Foods & Drug Administration by holding that the goods cannot conform to A-17.15

of Appendix B of PFA Rules which covers refined vegetable oil.

(iii) The goods were edible oil and the sample test report does not in any way rule out that the impugned goods were RBD Palmolein mixtures

inasmuch as the test report merely stated that sample conformed to the standards of RBD palmolein oil laid down under Item A 17.20 read with Item

A 17.15. The appellant had submitted Country of Origin Certificate as required in terms of Rule 11 of the DOO Rules, 2000 and all other conditions of

the said Rules were also satisfied.

Id. A.R. for Revenue on other hand stated that the test report certified the goods to be RBD palmolein and therefore notwithstanding the fact that

Country of Origin Certificate has been issued by the authorized authority of Sri Lanka, the requirement of DOO Rules, 2000 are not satisfied and

therefore, the benefit of exemption Notification No.26/2000-Cus has been correctly denied. Further, the good were classified by appellant under CTH

15.18 which covered inedible mixtures but were sold directly to consumers as edible and therefore, there was misdecaratlon.

We have considered the contention of both sides. As is evident from the report o FDA, the goods conformed to the standards of RBD Palmolein

laid down under Item No.A-17.20 read with Item No.A-17.15 as refined vegetable oil of Appendix 'B' of the PFA Rules (1955) which obviously

meant that the goods were edible. In that view the contention of the appellant that goods were correctly classifiable under CTH 15.17 as edible

mixture and not under 15.18 has force of credibility specially when it is seen that the exporter had applied to the Sri Lankan Customs Authorities for

export of RBD Palmolein mixture under brand name SOGO cooking oil mixture wherein it declared the ingredient to be 80% imported palmolein and

20% coconut oil mixed in the mechanized process and claimed classification under CTH 15.17 which was in accordance with the opinion of Sri

Lankan Customs Authorities as is evident from the endorsement of Sri Lankan Customs Authorities dated 19.5.2004;the relevant document is

appended below for ready reference:

(APPUCTION TO BEM ADE IN D/INQ: TC/2004/76

TRIPLICATE)

NAME AND ADDRESS OF APPLICANT : 609 INDUSTRIALC HEMICAL(PVT.)

LTD. 11/7, DHARAMPALA MAWATHA,

BADDEGANA PJTAKOTTE

FULL TRADE DESCRIPTION OF GOODS : 'SOGO' COOKING OIL

(PLEASE SEE INSTRUCTIONS OVERLEAF)

WHAT ARE THEIRC ONSTJTUTENT : IMPORTED VIRGINPA LM OLIEN AND

MATERIALS LOCAL COOCONUT OIL

WHAT ARE THEY USED FOR : COOKING AND FRYING

IN WHAT FORM ART HEY : LIQUID FORM

IMPORTED/EXPORTED

MANUFACTURER'SO R SUPPLIER'S: 609 INDUSTRIALC HEMICALS (PVT.)

NAME AND ADDRESS LTD. LOT: OS SEETHAWAKA

INDUSTRIAL PARK AVISAWELA

ADDITIONALI NFORMATION 80% IMPORTED PALMO LIEN MIXED

ORCOMMETNS: WITH 20% COCONUT OIL IN THE

MECHANISED PROCESS.

H.S. NO. INA PPLICANT'S OPTION AND AS PER THEI NTERNATIONAL H.S.

HS CODE 15.17.90 REASONS THEREFORE: CODE CLASSIFICATIN IT IS

CATEGORISED AS (VEGETABLE

EDIBLE OIL MIXTURE

HAS PREVIOUST .C. ADVICE BEEN YES

OBTAINED FOR THESE GOODS

609 INDUSTRIALC HEMICALS (PVT.)

LTD.

Sd/

DATE 13-06-2004

(FOR OFFICE USE ONLY)

CUSTOMS OPINION - VALID UNTIL FOR SIX MONTHS

CUSTOMS PAYMENTR ECEIPT NO. & : 6613 of 13/05/2004

DATE

TARIFF ITEM : 1517.90

COMMENTS : Subject to revision of this decision which could

occur during the period of validity.

Sd/-

19/05/2004 Sig/P.G. Wijesekara)

DIRECTOR CUSTOMS (TFA) DIRECTOR OF CUSTOMS ( I & T)

In the wake of the aforesaid certification, there is no doubt that the goods (palmolein oil CTH 1511) imported into Sri Lanka had undergone a change

at four digit level vis-a-vis the goods exported to India classifiable under 15.17. Further, in the wake of test report of FDA, the Commissioner's

observation that the goods did not conform to the standards laid down under Item A-17.15 of Appendix B of PFA Rules, is without any basis.

Incidentally, even if the classification is taken as CTH 15.18 even then the Country of Origin requirements remain satisfied and therefore for the

purpose of assessment of duty this controversy/contention regarding classification of the impugned goods is not of any consequence though in the light

of the analysis above, we are of the view that the appellant has been able to demonstrate that the classification CTH 15.18 (instead of 15.17) shown

by the exporter in the invoice was pure oversight. It may be pertinent to mention here that a mixtures of 80% Palmolein and 20% coconut oil can

conform to the standards of RBD Palmolein laid down under Item A 17.20 read with Item A 17.15 for refined vegetable oil of Appendix B of PFA

Rules 1955 and therefore, the report of Central Food Laboratory is supportive of the appellant's claim regarding classification. Under the DOO Rules

notified vide Notification No.19/2000-Cus. (NT) dated 1.3.2000 one of the conditions required to be satisfied for declaring such goods as of Sri

Lankan origin is that (a) processing in Sri Lanka should result in change of classification at 4 digit level (b) the third Country goods should not account

for more than 65% of the FOB value of the goods and (c) the goods should be accompanied by Country of Origin certificate in the prescribed

proforma from the competent Sri Lankan authorities. Ld. Adjudicating authority has acknowledged that certificate of country of origin has been issued

by competent Sri Lankan authority certifying that the value of non-originating material is 54.23% which is less than the 65% of FOB value of the

goods which conforms to the requirement of Rule 7(b) of DOO Rules, 2000. From the foregoing discussion it is also evident that as per the

requirement under Rule 7(b) of DOO Rules, 2000, non-originating materials were sufficiently processed so as to result in a different classification at

the 4 digit level of the Harmonized Commodity Description and Coding System.

In the light of the aforesaid analysis we are of the view that appellant satisfied the requirement of Country of Origin as stipulated in the DOO Rules,

2000 and therefore, was entitled to the benefit of Notification No.26/2000-Cus. Consequently, the impugned order is not sustainable. The appeal is

allowed.