N.V. Ramana JUDGMENT
A.K. Sikri, J.
1. The issue involved in the present appeal is whether the Respondent/Assessee is entitled to avail the benefit of Notification No. 21/2002-Cus dated 01.03.2002 read with Notification No. 66/2004-Cus dated 09.07.2004 for import of crude palm oil (non-edible grade) which is not used in the manufacture of Industrial Fatty Acid whereas the Assessee is using the same for manufacturing the refined edible oil.
2. This issue has arisen in the following factual background:
The Assessee is the manufacturer of refined edible oil, Vanaspati, cotton yarn, starch, cattle feed, wheat floor etc. It is registered with Kadi Division of the Central Excise. From April, 2002, the Assessee engaged itself in refining of various edible oils. During the course of refining, it used to get Palm Fatty Acid Distillate as a by-product which was classified under Chapter Heading No. 38231900 and cleared it duty free claiming the benefit of Notification No. 1175/75-CE dated 30.04.1975. During the period September, 2003 to January, 2004, the Assessee imported 1990.031 metric tons of crude palm oil. At that time crude palm oil having Free Fatty Acid (FFA) 20 percent, or more was eligible for concessional rate of duty under Notification No. 21/2002-Cus dated 01.03.2002. No condition was attached to avail that exemption.
3. We are not concerned with this import in the present appeal. Thereafter on 16.01.2004, Notification No. 21/2002-Cus dated 01.03.2002 was amended by Notification No. 20/2004-Cus dated 16.01.2004 wherein the words "for the manufacture of soap" were inserted in the original notification.
4. The Assessee imported 8435.816 metric tons of crude palm oil (industrial grade) valued at Rs. 17,15,88,508/- and cleared the same on payment of customs duty of Rs. 3,47,95,453/- (@20% basic + 2% education cess) under Notification No. 21/2002-Cus dated 01.03.2002 read with Notification No. 66/2004-Cus dated 09.07.2004 during the period 12.09.2004 to 12.08.2005. As per the said notification, crude oil (non-edible oil) could be imported by paying customs duty @20% only when the said crude oil is to be used in the manufacture of soap or Industrial Fatty Acid. The Assessee in the present case have been manufacturing refined edible oil out of the said crude oil. The Assessee did not have facilities for saponification and fat splitting in their factory. The manufacturing process is one of distillation. As a result of this process, a product called "Palm Fatty Acid Distillate" emerges. The Assessee after the processing of the imported 8435.816 metric tons of crude oil (non-edible grade) has manufactured 2219.895 metric tons of palm fatty acid distillate (industrial grade) i.e. approximately 25% and approximately 70% as refined palm oil.
5. Having regard to the aforesaid facts, the Appellant/Revenue was of the view that the Assessee was not entitled to the benefit of Notification No. 21/2002 read with Notification No. 66/2004. The Department, thus, issued show cause notice to the Assessee demanding custom duty in the sum of Rs. 7,89,89,868/- under para 8 of Customs (Import of goods at concessional rate of duty for manufacture of excisable goods) Rules, 1996 (hereinafter referred to as the 'Rules') as well as interest Under Section 28AB of the Customs Act, 1962 (hereinafter referre........