2004 (97) ECC 321 (Tri)

CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL

West Regional Bench -- Mumbai

Shri S.K. Sekhon, Member (T) and Shri T. Anjaneyulu, Member (J)

Pushpanjali Floriculture Ltd.

Versus

Commissioner of Customs, Mumbai

Appeal No. C/808/04

[Arising out of Order-in-Appeal No. 436/2004 MCH dated 31st August 2004 passed by the Commissioner of Customs (Appeals), Mumbai]

Order No. A-1150/WZB/2004/C-III, dtd. 21.9.2004

Imported Goods

DFRC Licences -- Paragraph 2.11 of the EXIM Policy clearly states that though the import of any goods is through the State Trading Enterprise the same also be imported by any other person under a licence/certificate/permission granted by the DGFT -- Appellants have produced a DFRC, which covers the goods imported, the same have to be held to be validly imported by appellants -- Held, there is nothing available on record to obstruct the coverage of imported goods under DFRC licence produced -- The conduct of Dy. Commissioner is directing refusal of assessment under DFRC claim and transferring the BE not upheld -- Orders of Commr. (A), set aside -- Matter remitted to Dy. Commr. with direction to assess the BEs as per DFRC licence produced.

[Paras 3 & 4]

PRESENT :

Shri J.C. Patel, Advocate for the appellant.

Shri B. Chandra, JDR for the respondent.

Cases Cited :

1. CC v. East West Exporters, 1991 (52) ELT 66 (T)............................................. [Para 2]

2. Danhit Chemicals (P) Ltd., 1999 (112) ELT 844................................................ [Para 2]

3. Shalimar Paints, 2001 (134) ELT 285.............................................................. [Para 2]

Per : S.S. Sekhon

The appellants have imported two consignments of "Refined Coconut Oil" and have sought clearance thereof by filing Bills of Entry numbers 459958 and 468260 against DFRC Licences which inter alia cover "Antifoaming Agents: (Antifoaming Chemicals)" and "Viscosity Reducing Agents: (Viscosity reducing Chemicals) used as an "Antifoaming Agent" and "Viscosity Reducing Agent" in the manufacture of White Sugar established by the following:

(i) Certificate dated 7th April 2004 of University Department of Chemical Technology, Mumbai.

(ii) Letter dated 28th April 2004 of National Sugar Institute, Government of India,

(iii) Opinion dated 23rd June 2004 of IIT, Bombay solicited by the Customs Department.

(iv) Affidavit dated 12 July 2004 of Dr. S.P. Potnis, Professor of Polymer Technology and Director of Department of Chemical Technology, University of Bombay,

(v) Letter dated 7th April 2004 of the Sugar Technologists' Association of India, and

(vi) Letter dated 11th June 2004 of Government of India, Ministry of Consumer Affairs, Food and Public Distribution.

(vii) Extract from the Book titled, "DEFOAMING Theory and Industrial Applications".

2. The Department, however, without disputing, the material or arriving at or and giving any reasons why Refined Coconut Oil is not a Reducing chemical and Antifoaming chemical used the manufacture of White Sugar and accordingly was to be objected for clearance under the DFRC licence produced. The Assistant Commissioner of Customs, Group 7, by his order and decision contained in, and communicated by, his letter dated 6th August 2004 refused to allow clearance to the said goods against the DFRC licences produced and holding that clearance to the said goods cannot be granted under the DFRC licence, the order reads as --

"Kindly refer to 02 Bills of Entry No. 459958 & 468260. Wherein you have sought clearance of Refined Coconut Oil under DFRC Licences. DYCC vide report dated 9.6.2004 TR No. 1845 dated 24.5.2004 has confirmed that the goods are Refined Coconut Oil. It is silent however on the fact as to whether Coconut Oil is used as antifoaming/viscosity reducing agent in the Sugar Industry, for manufacture of white sugar. This report specifically pertained to EDI B/E No. 459958. The opinion was further substantiated on Note dated 29.6.2004 by Shri Rakesh Kumar, Chemical Examiner. Where in it was mentioned that no where n the literature available here, it is mentioned that RBD Coconut Oil is being used as anti foaming substances in Sugar Industry.

Since the DFRC Licence submitted by you allows goods which are (a) antifoaming agents (anti foaming chemicals) (b) Viscosity reducing agents (viscosity reducing chemicals) and since the goods have been found not possessing these properties the clearance under DFRC is questionable and the benefit of DFRC Licences cannot be extended to you. It is also opinioned by DYCC, that Coconut Oil is not a separate chemically defined compound.

You are advised accordingly to get your BE's assessed in the import group I, of New Custom House on merits. As DFRC benefit is not applicable and B/E is to be transferred to Group I for assessment, I retrain from commenting on ITC angle i.e. violation of canalising provision and the same is to be examined by the Assessing Group.

The Bond, BG executed against the cargo which is Bonded under Section 49 will be forwarded to the Import Commissionerate, alongwith the case file.

The importers preferred an appeal against, the same, to the Commissioner of Customs (Appeals) who rejected the Appeal, by his Order dated 31.8.2004, on coming to the findings --

I have gone through the records of the case. The appellants are importing refined coconut oil against DFRC licence on the ground that the same are used as antifoaming agents in Sugar Industries. In this connection, the appellants have submitted the following material in support of their claim:

(a) Certificate dated 7th April, 2004 of University Department of Chemical Technology, Mumbai.

(b) Letter dated 28th April, 2004 of National Sugar Institute, Government of India, Kanpur

(c) Letter dated 23rd June, 2004 of IIT, Bombay

(d) Affidavit dated 12th July, 2004 of Dr. P. Potnis Retd. Professor of Polymer Technology and Director of Department of Chemical Technology, University of Bombay.

(e) Letter dated 7th April, 2004 of the Sugar Technologists Association of India, and

(f) Letter dated 11th June, 2004 of Government of India, Ministry of Consumer Affairs and Public Distribution.

I find that the report of DYCC is very specific on the issue. The appellants should have challenged the opinion of DYCC, which they have not done. Accordingly, I am unable to accept these fresh materials. Further more as per the Licence, the goods allowed as per the licence are antifoaming agents (antifoaming chemicals)/ viscosity reducing agents (viscosity reducing chemicals). The imported goods are classified under Chapter 15, as Vegetable oil, and the same cannot be called a chemical, which should have been classified under Chapter 29. Further more the goods being in the canalized list of items, Certificate from STC is also required. I do not find any reason to interfere with the decision of the lower authority.

Hence the present Appeal.

3. Heard both sides and considered the matter it is found --

(a) The Commissioner of Customs (Appeals) seriously erred in ignoring and disregarding the following evidence which was placed before the Assistant Commissioner as well as before the Commissioner (Appeals) which conclusively establishes that Refined Coconut Oil is used as an Antifoaming Chemical and Reducing Chemical in the manufacture of White Sugar.

(i) certificate dated 7th April 2004 of University Department of Chemical Technology, Mumbai,

(ii) Letter dated 28th April 2004 of National Sugar Institute, Government of India,

(iii) Letter dated 28th April 2004 of IIT, Bombay,

(iv) Affidavit dated 12 July 2004 of Dr S.P. Potnis, Professor of Polymer Technology and Director of Department of Chemical Technology, University of Bombay,

(v) Letter dated 7th April 2004 of the Sugar Technologists' Association of India, and

(vi) Letter dated 11 June 2004 of Government of India, Ministry of Consumer Affairs, Food and Public Distribution.

(b) The Commissioner (Appeals) holding that the said evidence was fresh material, is factually incorrect. The said evidence had been called for by and addressed to the Customs and received by them, copies thereof were also submitted by Appellant's letter dated 10th May 2004 to the Asstt. Commr. and was therefore not fresh material. The findings & basis of the Commissioner are not correct on facts. The findings arrived by the Commissioner being factually incorrect are to be set aside and it has to be held that the Commissioner has not applied his mind to the facts on record. Such orders cannot be sustained.

(c) Commissioner (Appeals) is ignoring the said material and in holding that the Dy. CC report was very specific, and that the Appellant should have challenged the said opinion ignores the law and the facts. Section 144 of the Customs Act, 1962 provides for drawl of samples, it does not have any provision for appeal on the report of Dy. Chief of Chemist, like erstwhile Rule 56(4) of the Central Excise Rules, 1944. Moreover, there cannot be an appeal, by an Importer, against an opinion tendered by Dy. Chief Chemist. An appeal under section 128 of the Customs Act, 1962 can be taken cognizance of, only against an order or decision of an Officer of Customs lower in rank than Commissioner of Customs. There are no orders, shown to us or relied by the Ld. Commissioner (Appeals), That Dy. Chief Chemist of the Customs Laboratory, is an Officer of Customs, lower in rank them the Commissioner of Customs. That the said officer is appointed under section 3(e) of the Customs Act, 1962 as an Officer of Customs is also not shown. The reasons arrived at by the Commissioner exhibit a total lack of application of knowledge with a pre set mind to dismiss an appeal, without having any reason to do so. This order of the Commissioner (Appeals) is therefore to be set aside.

(d) The Commissioner (Appeals), has seriously erred in holding that the Dy. CC opinion was very specific on the issue. The opinion as referred to, merely states that no literature is available with the Dy. CC to show the use of Coconut Oil as Antifoaming or Viscosity reducing agent in Sugar industry. There was no positive and specific opinion of the Dy. CC that coconut oil is not so used. The mere fact or the Dy. CC inability and ill-equipped library to locate such literature, will not mean, that there is no literature/material at all, which shows the use of coconut oil as antifoaming/viscosity reducing agent. The technical/expert authorities reports, such as the UDCT, IIT, National Sugar Institute, etc. is teeming with such Literature/material and they rely upon the same to opine, based on literature cited by them, that coconut oil is used as antifoaming/viscosity reducing agent in sugar industry. There was no reason to disregard the same. The Commissioner appears to have not even read the same. Further, the Appellants have inter alia cited the Book "Defoaming Theory and Industrial Applications" which at pages 319 to 321 specifically mentions that `coconut oil' is used a antifoaming/viscosity reducing agent in sugar industry and shown us the same. The Ld. Advocate submits that the importer had shown this Book to the Custom Authorities and the letters from various authorities were solicited by them, and were on record with the department. Therefore, it is apparent, that the rejection, of claim of clearance, as made by both lower authorities, is rejection of a genuine claim based on Literature/material without even referring to the same when such Literature/material was available with them to permit the clearance. That indicates a timorous conduct or and a desire not to allow the clearance. The letter of the Dy. Commissioner should not have been issued. If he was in doubt, about the eligibility, after dealing the clearance for months, he should have sought instructions guidance from his Commissioner or and issued a show cause notice denying the assessment as sought The conduct to shuttle BEs filed without seeking orders from the Senior officers leaves a doubt in our minds, that a Ghost Hand guided the Dy. Commissioner to issue the letter dated 6.8.2002. That surely is not sound Administration of affairs in the Customs House.

(e) In view of the certificates/letters/affidavits of leading technical/expert authorities as well as the clear mention of the use of coconut oil in the sugar industry as antifoaming/viscosity reducing agent. In the absence of any contrary evidence having been produced by the department to rebut and counter the aforesaid evidence solicited and got by them, the Assistant Commissioner and Commissioner (Appeals) were bound to accept the said evidence and to hold that the goods imported were covered by licences produced and to have not upheld the new that the goods (Refined Coconut Oil) have been found to be not possessing the properties of Antifoaming and viscosity reducing agents making that clearance under DFRC is questionable and the benefit of DFRC licences can be extended. There is not a single piece of evidence produced by the Assistant Commissioner, to establish that Refined Coconut Oil does not possess Antifoaming and viscosity reducing properties. On the other hand the evidence obtained by Customs & before the Assistant Commissioner had clearly and consistently established that Refined Coconut Oil possesses Antifoaming and viscosity reducing properties. The Assistant Commissioner has erred in concluding that Refined Coconut Oil does not possess Antifoaming/viscosity reducing properties merely because the report dated 9th June 2004 of the Deputy Chief Chemist is silent on the fact as to whether Coconut Oil is used as Antifoaming/viscosity reducing agent in the manufacture of white sugar. The mere fact that the DYCC report was not positive on this aspect due to lack of infrastructural facility cannot by itself lead to the conclusion that coconut oil does not possess the said properties when on the other hand evidence in the form of technical opinion from various technical institutes/authorities and had been placed before the Assistant Commissioner should have been relied upon as they clearly state that coconut oil is used as an Antifoaming/viscosity reducing agent in the manufacture of white sugar.

(f) The reliance placed on an opinion expressed by the Dy. Chief Chemist, admittedly based on insufficient infrastructural facilities or a Library access to him, by the lower authorities cannot be upheld. It is well settled that Chemist of the Custom Laboratory have only to give the test report and not express opinions to guide or as in thus case bind, the assessing officers (See 1991 (52) ELT 66 Tribunal CC v. East West Exporters; Danhit Chemicals (P) Ltd., 1999 (112) ELT 844 & Shalimar Paints, 2001 (134) ELT 285 Tri. this decision being upheld by Supreme Court 2002 (145) ELT A 242 SC, wherein it was held that Chemical Examiner has to give composition of goods and not comment on Classification. The decision order of both the lower authorities therefore based on opinions of Dy. Chief Chemist cannot be upheld.

(g) The Commissioner (Appeals), should have held, that the Assistant Commissioner seriously erred in relying on & proceeding on the basis of the unsubstantiated opinion of the DyCC that Coconut Oil is not a separate chemically defined compound. This opinion that Coconut Oil is not a separate chemically defined compound is not only irrelevant and extraneous to the issue at hand but also exhibits lack of application of mind or lack of access to standard book on Chemistry. Coconut oil is listed as one of the Chemicals in Hawley's Condensed Chemical Dictionary which shows that Coconut oil is assigned CAS (Chemical Abstracts Service) Registration number. The department at the make much level has sent the report of the Ld. Professor of IIT should have been send to Dy. CC, it lists the literature exhibiting the facts contrary to the opinion by Dy. Chief Chemist. Further it is clear from that literature hereto that Coconut Oil is a chemical. One cannot deny IIT Professors reports without any basis.

(h) A, DFRC license does not require that the goods imported, should be separate chemically defined compounds. The only requirement is that the goods should be "antifoaming chemical" or "viscosity reducing chemical". The fact that the Coconut oil is an antifoaming and viscosity reducing chemical is clearly established by the said certificates/letters of IIT etc. The Assistant Commissioner has not disputed that coconut oil is not a chemical. Nor has he produced any evidence to establish that coconut oil is not a chemical. The very fact that coconut oil is listed in the Condensed Chemical Dictionary having CAS number and IIT's Prof. report is itself sufficient to establish that. The Commissioner (Appeals) has erred in travelling beyond the Order of the Assistant Commissioner by holding that Coconut Oil cannot be called a chemical. He erred in concluding that Coconut Oil is not a chemical because it is classified under Chapter 15 of the Customs Tariff and not under Chapter 29. That is presuming that chemicals fall only under Chapter 29 of the Tariff, and in or other Chapter.

(i) On perusal of paragraph 2.11 & 4.31, 4.31A of the Exim Policy Hand Book of procedure volume I Rank 2003 Edition as on 1.4.2003. Since it is clear that coconut oil under import cannot be denied coverage and eligibility under the DFRC licence produced, the same is to be held to be validly imported. Proceedings on the basis that since Coconut oil is canalized through STC & the same cannot be imported, without a certificate from STC ignore that it is clear from the ITC (HS).

Policy Heading 15.13, that though the import of coconut oil is permitted through the State Trading Enterprise, subject to Paragraph 2.11 of the Exim Policy. A plain reading of this para clearly states that though the import of any goods is through the State Trading Enterprise the same may also be imported by any other person under a licence/certificate/permission granted by the DGFT. Since in the instant case, the Appellants have produced a DFRC, which covers the goods imported, the same have to be held to be validly imported by the Appellants. The Commissioner (Appeals) should have ordered the Assistant Commissioner to grant clearance to the said goods against the DFRC, licence produced.

4. In view of the findings herein above, it is to be held that there is nothing available on record to obstruct the coverage of the imported goods under DFRC licence produced. The conduct of the Dy. Commissioner is directing the refusal of assessment under DFRC claim and transferring the BE is not upheld. The orders of the Commissioner (Appeals) are set aside and the matter remitted to the Dy. Commissioner with direction to assess the BEs as per the DFRC licence produced.

5. Appeal to be disposed of in above terms.

6. Ordered accordingly.

…………………..