COLLECTOR OF CUSTOMS Vs. MANSINGKA BROTHERS
LAWS(CE)-1986-11-4
CUSTOMS EXCISE AND GOLD(CONTROL) APPELLATE TRIBUNAL
Decided on November 26,1986

Appellant
VERSUS
Respondents


Cited Judgements :-

PHARMACHEM VS. COLLECTOR OF CUSTOMS [LAWS(CE)-1996-3-112] [REFERRED TO]


JUDGEMENT

D.C. Mandal, Member (T) - (1.)THESE appeals relate to common issues. THESE were, therefore, taken up for hearing together and are being disposed of by this common order.
(2.)Appeal No.C-152/84-Cal., vide Sr.in was filed by the Collector of Customs, Calcutta as per order of the Central Board of Excise & Customs, New Delhi in Order in 1/R-Cus/Gr. dated 23.7.1984 under Section 129-D(1) of the Customs Act, 1962, against the order dated 17.11.1983 passed by the said Collector. The other appeals, vide Serial Nos.2 to 10, were filed by the importers concerned against the respective order-in- original passed by the Collector of Customs, Calcutta.
The facts of the cases, in brief, are as follows: -

(i) Appeal No.C-152/84-Cal.

(a) M/s Mansingka Brothers, respondent in , entered into a contract No. Oil/002/D/83 dated 15.3.1983 with M/s Kuok (Singapore) Pvt. Ltd., Singapore for importing 1500 M/Tons of Stearin Fatty Acid. The goods were to be shipped in part consignments. The first consignment of 200.17 M/Tons of the goods arrived at Calcutta Port on 13.9.1983 per "SS Johneverett". The respondent filed Bill of Entry on 13.9.1983 for clearance of the goods under OGL - Appendix 10 - Item No. 1, list 8, Part III of I.T.C. Policy 1983-84. On 24.9.1983 the Assistant Collector of Customs issued a show cause notice alleging that the importation of the goods was not authorised under Open General Licence vide Appendix 10 of the Import Policy. It was also stated in the show cause notice that Stearin Fatty Acid was covered by the term "Palm Fatty Acid " appearing at Sr.No. 50 of Appendix 4 of the Import Policy 1983-84 as "Palm Fatty Acid" is a generic term and stearin fatty acid is derived from the source of palm. Since "Palm Fatty Acid" was a banned item, the respondents were asked to show cause as to why the goods should not be confiscated under Section 111 (d) of the Customs Act. The respondents explained, in reply to the show cause notice, that Palm Fatty Acid and Stearin Fatty Acid were two different products, chemically and also as per understanding of the Trade. The Collector of Customs, Shri T.S. Swaminathan, after considering the reply to show cause notice and giving a personal hearing, passed order to release the goods under OGL In the adjudication order, while ordering release of the goods, the Collector observed as follows:-

"I have carefully considered the arguments. There is considerable force in what the importers have placed before me. in the trade, palm fatty acid and palm stearin fatty acid are differently known.The source from which these materials are derived is also different in that palm fatty acid, is derived from palm oil, while stearin fatty acid is derived from palm stearin, the latter being one of the constituents of the palm oil. In composition also these two materials differ. While palm oil contains palmitic acid to an extent of 41 to 47 per cent, the palmitic acid content in palm stearin is higher, starting from 46 to 74 per cent. Similarly, in terms of oleic acid (unsaturated acid) the palm oil content is nearly 37 to 40 per cent, while palm stearin acids have lower percentage, namely, 15 to 37 per cent. Due to the lower content of oleic acid, the iodine value for palm stearin is 21 to 49 while for palm oil, it is 51 to 55. Also the description in appendix 9 for palm oil is an artificial definition in that the term has been allowed to include even other oils, such as, palm Kernel Oil and also the constituents of palm oil, namely, palm olein and palm stearine. However, this artificial definition cannot be transferred to Appendix 4 where the term used is 'palm fatty acid' without any qualification or addition. This position appears to be a lacuna in the policy. It is a legal avoidance, but not illegal import. In these circumstances, the goods may be released. WREC if necessary may also be issued for the period for which the goods were detained."

(b) The second consignment of the goods weighing 167.244 M/Tons against the same contract arrived at Calcutta Port on 2.11.83 per vessel "Ramoneverett." The respondent sought clearance of the goods under OGL vide Sr. in of Appendix 10, list 8, Part III of Import Policy 1983- 84. Bill of Entry for clearing the goods was filed on 9.11.83. The Collector of Customs, Calcutta, vide his order dated 17.11.1983, allowed the clearance of the goods on caution. No show cause notice was issued to the respondents before passing this order and no opportunity was given to explain their case. Copy of the order of caution was also not endorsed to the respondents. Extract from the Collector's order dated 17.11.1983 in File No. S/33-78/83-A (Gr. I), as filed with the appeal memorandum, reads as follows :-

"In so far as the technical aspect is concerned I have discussed with the Deputy CWef Chemist as well as with the concerned Deputy Collector. My tentative view is as follows :-

From palm oil by fractionation, two products are obtained. The first one is palm olein and the other one is palm stearin. From palm stearin by further processing, two products are obtained, one is fatty acid and another is glycerin. Here we are concerned with the fatty acid which is obtained from palm stearin. Here we find that fatty acid can be obtained from palm stearin which in turn is obtained from palm oil. This product can, therefore, be called stearin fatty acid which the importers are claiming to have imported. The other process of obtaining fatty acid Is directly from palm oil by direct processing. This product can be called palm fatty acid which is banned. The question is whether the palm stearin fatty acid which is indirectly obtained through palm stearin is the same as palm fatty acid. The difference is only this much that while both of them are derived from palm oil, one (palm fatty acid) is derived by direct processing, whereas the other one (palm stearin fatty acid) is derived by indirect processing. It is derived from a fraction of the palm oil. Ultimately, it is the fatty acid which is produced. The question to be determined is whether the palm fatty acid which is banned will also refer to palm stearin fatty acid which is claimed by the importer.

Chemically speaking both palm fatty acid and palm stearin fatty acid are not well known chemical derivatives occurring in any technical literature of standard books. The Poram Technical Brochure of Malaysian Palm Oil Refinery Industry is available for consultation. The goods have also been imported from Malaysia and the country of origin is Malaysia. In this literature, there is a mention of crude fatty acid derived from palm oil. Obviously, this refers to the fatty acid derived directly from palm oil and not from palm stearin. Otherwise it would have been described as palm stearin fatty acid. There is no such expression as palm stearin fatty acid in this Technical literature. In this case, apart from the party's statement there is no other way of distinguishing whether it is derived from palm oil directly or from the fraction of palm oil, namely, palm stearin. The Deputy Chief Chemist told me that it is not possible to distinguish it in our laboratory. Ultimately, the products, that is, fatty acid derived from palm oil either directly or indirectly (i.e. from the fraction, namely, palm stearin) are the same excepting for the difference in the palmitic acid content. I have also seen the minutes of the meeting of the Heads of Laboratories of Customs & Excise held on 21 st and 22nd April, 1983 a copy of which is placed in the file. In this discussion also, the minutes say that the products would be taken as same although there is a suggestion that C.C.I. & E. may have to give a clarification. Dy. C.C.'s opinion has also been seen by me. He also said that both the items should be taken as the same.

In order to find out whether palm fatty acid and palm stearin acid are same or not, it would have been better to find out from the market whether they are known as different entities in the market parlance. But there is no Indian market of these goods and the importations are very rare and therefore there is no question of finding out whether in the market parlance they are known as same or not. In any case, if any commodity as palm stearin or palm fatty acid was known as a different entity in the market, then the technical literature would have described this as such. In fact, I find from the technical literature mentioned above that the crude fatty acid described therein does not distinguish between the fatty acid derived from palm oil directly or from a fraction of palm stearin. Obviously, there is no such other product known either in the trade or in the technical literature as palm fatty acid, otherwise it would have been distinguished even in the technical literature also. In fact, the palm stearin fatty acid is written by deriving the nomenclature from its method of derivation. It is not our contention that palm oil and palm stearin are the same. But it is only our contention that the end product, that is, the fatty acid derived from palm oil is the same whether you derive it directly or indirectly through another fraction, it has, therefore, to be concluded that the goods imported fall within the banned category. However, the licence aspect will have to be discussed separately.

D.C. (N)

Sd/ S. Mukhopadhyay Collector dated 17.11.1983.

I have further discussed with the Deputy Collector. I have also taken note of the fact that previous Collector, Shri T.S. Swaminathan has already allowed the importation after considering it in length. His order is in File No. S/33-67/83-A (Gr.l). D.C. tells me that canalisation of all fatty acid has been done although no order has so far been received by us. It is expected any time. It has been reported in the news, he tells me. In view of this, it may not be possible for the importers to import this item in big quantities under OGL Since the previous Collector has already allowed it, it would not be proper to confiscate it even though I have recorded a note yesterday that purely on merit I have a different opinion. I also take note of the fact that the chemists also differed and consider It as a doubtful case. It is also found that Cochin is allowing such consignment In view of all these circumstances, I decide to release this consignment on caution, (no need of p.h.).

Sd/-S.Mukhopadhyay Collector 17.11.1983

D.C. (Nair)"

(c) In exercise of the powers conferred upon it under Section 129-D(1) of the Customs Act, 1962, the Central Board of Excise & Customs, New Delhi, called for the records of the above order dated 17.11.83 for the purpose of satisfying Itself as to the propriety and legality of the said order and examined the same. The Board, vide its order dated 23.7.84, directed the Collector of Customs, Calcutta to make an application against his order dated 17.11.1983 to this Tribunal under Section 129-D(4) of the Customs Act 'for imposing redemption fine in lieu of confiscation proportionate to the margin of profit and also for imposition of personal penalty on the importers under Section 112 of the Act commensurate to the gravity of offence and for suitably modifying the said order of the Collector." Accordingly, the Collector of Customs filed this appeal.

(ii) In the remaining 9 appeals, vide appeals at serial Nos. 2 to 10, the appellants Imported stearin fatty acid against contracts entered into with foreign suppliers before 11.11.1983. On arrival of the goods, the appellants sought clearance of the same under O.G.L. vide Appendix-10(1) of the Import Policy for 1983-84 on the ground that the goods did not figure in any of the Appendices 3 to 9 and 15 of the Import Policy. The Custom House, Calcutta took a different view that the goods were covered by expression palm fatty acid appearing at serial in 0 of Appendix 4 of the Import Policy for that year and hence the import of the same was banned prior to 11.11.83 and canalised through State Trading Corporation of India from 11.11.1983. The appellants filed Writ Petitions in Calcutta High Court and obtained interim orders, but the same were lateron vacated/withdrawn. The appellants then submitted before the adjudication proceedings under the Customs Act before the Collector of Customs, Calcutta.The Collector of Customs did not accept the contentions of the appellants and held the import of the goods as unauthorised, being covered by Serial in 0 of the Appendix-4 of the Import Policy. He adjudicated the cases and confiscated the goods under Section 111 (d) of the Customs Act, 1962 with fine in lieu of confiscation of varying amounts and also imposed penalty of various amounts under Section 112 of the Customs Act on the appellants. The present appeals are against the said orders of Collector of Customs, Calcutta.

(3.)DURING the hearing before us Shri Jatin Ghosh, learned Advocate argued for the appellant in and respondent in . Shri S.D. Nankani, learned advocate argued for the respondent in and Appellants No. 2,3,4,8 and 9. Shri Habibullah Badsha, learned Advocate argued for the appellants in ,6 and 7. Shri Bhaskar Gupta, learned Advocate argued for the Appellant No. 10.


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