CESTAT Mumbai Upholds Duty Exemption On Edible-Grade Oils Imported For Cosmetic, Pharmaceutical Use

The Mumbai Bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has dismissed a Revenue appeal challenging customs duty exemption granted to Pioma Chemicals on imports of refined peanut oil, sunflower oil, walnut oil, almond oil and macadamia nut oil.

The tribunal held that the benefit could not be denied on the ground that the oils were intended for use in cosmetic and pharmaceutical products.

A bench of Judicial Member Dr. Suvendu Kumar Pati and Technical Member M.M. Parthiban upheld the order of the Commissioner (Appeals) granting the exemption benefit to the importer.

The tribunal observed that the imported oils had been tested by an FSSAI-approved laboratory and were found to conform to edible-grade standards prescribed under food safety regulations.

“Thus, based on such a laboratory test reports, the standards prescribed by FSSAI authorities have been fulfilled and in terms of the Supplementary Note, it could be concluded that imported goods are of “edible grade”, as per the parameters given by FSSAI, which is also tested and reported. Therefore, it is a sufficient evidence/ document for coming to the conclusion that the imported goods are of edible grade, and are eligible for extending the exemption benefit under Notification No.50/2017- Customs dated 30.06.2017”, it observed.

The dispute arose after Pioma Chemicals imported the oils from Germany and claimed exemption under Notification No. 50/2017-Customs. Customs authorities denied the benefit. They contended that the oils were intended for use in skincare formulations, hair oils, hair creams, and other cosmetic or pharmaceutical products rather than food applications.

The Revenue argued that the imported goods fell under the tariff headings specified in the notification. However, it contended that they did not satisfy the requirement of being “edible grade” because they were declared for use in products other than food. The department also relied on a CBEC circular to contend that edible oils must be meant for human consumption.

The Tribunal noted that representative samples of the imported oils had been tested by Doctors' Analytical Laboratories Private Limited, an FSSAI-approved laboratory. The laboratory reported that the products conformed to edible-grade standards prescribed under food safety regulations. The exporter had also certified the oils as refined and edible grade.

Examining the exemption notification, the Tribunal found that the relevant entries required only that the goods fall under the specified tariff headings and be refined and of edible grade. It found that both conditions were satisfied in the present case.

The Tribunal also referred to its earlier decision in Ritika Pharmatech and the Gujarat High Court's judgment in Inter Continental (India). It noted that the exemption notification did not prescribe any end-use condition for claiming the benefit.

Holding that the imported oils satisfied the conditions prescribed under the notification, the Tribunal observed:

“we are of the considered view that the impugned order dated 31.07.2024 is proper and legal and requires no interference insofar it has extended the customs duty exemption under Sl. No. 64 and 71 of Notification No.50/2017-Customs dated 30.06.2017 to the goods imported by the respondent importer.”

The Tribunal consequently dismissed the Revenue's appeal.