Deletion Of Certain Parameters Does Not Make Refined Palmolein 'Crude Palm Oil' For Customs Duty: CESTAT Hyderabad

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Hyderabad has held that deletion of acid value and total carotenoid parameters from a customs exemption notification did not mean that refined or processed palmolein would qualify as “Crude Palm Oil” for concessional customs duty.

The Bench of Judicial Member Angad Prasad and Technical Member P. Anjani Kumar observed that the exemption could not be denied merely because the goods failed to meet parameters that were no longer part of the notification. The importer, however, still had to establish that the goods were actually Crude Palm Oil to claim the benefit.

“The omission cannot be construed to mean that every form of Palm Oil, including refined, bleached, deodorised or fractionated palmolein, must thereafter be treated as Crude Palm Oil,” the tribunal observed.

The case concerned Gemini Edibles and Fats India Ltd., which declared its imported cargo as “Crude Palm Oil – Edible Grade in Bulk” and claimed concessional Basic Customs Duty under Serial No. 57 of Notification No. 50/2017-Customs. The dispute involved 2,304.029 MT of palm oil out of a total cargo of 4,764.253 MT.

Gemini Edibles argued that the explanation prescribing acid value and total carotenoid parameters for Crude Palm Oil had been omitted from the notification with effect from February 2, 2020. It also contended that beta-carotene could deteriorate because of time, temperature, transportation and storage, making the laboratory reports inconclusive.

The department relied on the vessel's Loading Time Log, Ship's Ullage Report, commercial records and laboratory reports. The records showed that 2,304.029 MT of “RBD Palmolein in Bulk” had been loaded in specified tanks, while the remaining cargo was recorded as Crude Palm Oil in separate tanks.

The tribunal found that the shipping records were corroborated by the laboratory reports. Although some samples met the characteristics associated with Crude Palm Oil, others did not. It held that the department had established, on a preponderance of probabilities, that the disputed quantity was not Crude Palm Oil.

The tribunal further held that the omission of the explanation did not amend Heading 1511 or alter the tariff identity of Crude Palm Oil. The importer therefore still had to establish that the goods fell within the description covered by the exemption. Since the records identified the disputed goods as RBD Palmolein, denial of the concessional benefit was upheld.

On classification, the tribunal rejected the reasoning that post-import mixing or dilution with Crude Palm Oil could determine the tariff classification. It held that the goods had to be classified based on their identity and condition at the time of importation.

It nevertheless upheld classification under Customs Tariff Item 1511 9090 because the goods were RBD Palmolein when imported. The classification was not sustained on the basis of any subsequent mixing during discharge.

Gemini Edibles also disputed the 37.5% Basic Customs Duty rate, contending that 32.5% was applicable. The tribunal directed the adjudicating authority to verify the rate applicable on the relevant date and recompute the differential duty. If 32.5% applied, the demand would be reduced accordingly.

The tribunal upheld confiscation under Sections 111(m) and 111(o) and reduced the redemption fine from ₹2 crore to ₹1 crore. It also sustained the Section 114A penalty, subject to recomputation of the differential duty.

However, it set aside the separate ₹35 lakh penalty under Section 114AA. The tribunal observed that an incorrect declaration attracting the Section 114A penalty does not automatically justify another penalty under Section 114AA, particularly where no separate fabricated or forged document was identified.

The appeal was partly allowed, partly dismissed, and partly remanded for verification of the applicable Basic Customs Duty rate and recomputation of the differential duty.

The findings on the nature, classification and ineligibility of the goods for the concessional rate were not to be reopened.

For the Appellant (Gemini Edibles and Fats India Ltd.): S. Thirumalai, Advocate.

For the Respondent/Customs Department: Kakarala Prasanth Kumar, Authorised Representative.