CIRCULAR No.40/2001-CUS. Dated 13th July, 2001
Clearance
of vegetable oils imported for industrial purposes at concessional rate of duty
under notification No.17/2001-Cus., dated 1.3.2001- Reg.
Varying
practices being adopted by Custom Houses in the matter of interpretation of
notification No.17/2001-Cus., dated 1.3.2001, in regard to import of vegetable
oils specially crude palm oil claimed to have been imported for industrial
purposes have been brought to Board’s notice. Whereas, in some Custom Houses
some manufacturer importers have been allowed the concessional rate of duty of
35% treating the crude palm oil imported as other than edible oil, doubts have
been raised about admissibility of this concessional rate at certain other
Custom Houses taking into account the Board’s instructions under Circular
No.29/97-Cus., dated 31.7.1997. It has been argued that as per the said circular
even though the crude palm oil imported as such, considering the composition,
free fatty acid/acid content may not qualify to be termed as edible oil under
the PFA Act, 1954, but since the oil imported can be made fit for human
consumption after further processing, it has to be considered as vegetable oil
of edible grade – having due regard to the Board’s said circular.
2.
The issue has been examined in the Board and the circumstances in which the
aforesaid Board’s circular was issued also looked into. Further, consultations
also have been made with the Ministry of Food & Directorate of Vanaspati. It
is observed that notification No.17/2001-Cus., dated 1.3.2001 interalia
prescribes effective rate of duty for various categories of vegetable oils and
in terms of Sl.No.34 of the table annexed to the notification crude palm oil and
its fractions of edible grade in loose or bulk form – attract customs duty at
75%. However, in terms of the same notification, Sl.No.29 of the said table,
goods (other than edible oils) falling under heading Nos.15.07 to 15.15 are
liable to a concessional duty of 35%. Doubts arise as to the exact scope of
terms other than edible oils and edible grade which are not defined in the said
notification for the purposes of extending the lower duty or charging higher
duty for palm oil. It is observed that in “Edible Oils Packaging (Regulation)
Order, 1998 issued under Essential Commodities Act by the Ministry of Food and
Consumer Affairs (Department of Sugar and Edible Oils) vide notification
G.S.R.584(E), dated 17.9.98, the term edible oil means vegetable oils and fats
and includes any margarine, vanaspati, bakery shorting and fat spread as
specified in the Prevention of Food Adulteration Act, 1954 and rules made
thereunder for human consumption. The PFA Act, 1954 has laid down the standards
of crude palm oil and prescribed the maximum limit of the acid value for crude
palm oil as 10.0.
3.
Considering this definition one of the food and drugs laboratory after taking
samples from a consignment of the imported crude palm oil – which showed acid
values varying from 13% to 18%, has opined that the samples do not conform to
the standards of edible grade palm oil prescribed under PFA rules and is not
edible as such. In another case, a chemical examiner relying upon the Board’s
1997 circular, even though the sample had acid values of more than 13%, took the
view that it may be considered as edible oil as after processing it could be
made fit for human consumption. The discussions with the officers of Department
of Food and a critical look at the Board’s Circular of 1997 reveals that when
the question of extending concessional rate for edible oils was examined in
consultation with the Ministry of Food in 1997, for granting concessional rate
for edible oil, it is the end use which was finally stressed. The definition of
edible oil in “Pulses, Edible Oilseeds and Edible Oils (Storage Control)
Order, 1977 also is worth noting in this regard & it says edible oil means
any oil used directly or after processing for human consumption and include
hydrogenated vegetable oils.
4.
It may be observed that this definition does not make every crude palm oil
straightway to be termed as edible oil for the purposes of the aforesaid order.
It is to be noted that the oil should not only be capable of being used after
processing for edible purposes but the definition also contemplates that such
oil after refining should be used for edible purposes. In fact, in the Board’s
circular this aspect had been clearly mentioned and highlighted in the last para
when clarifying the scope of the term vegetable oils of edible grade in serial
number 15 to 11/97-Cus dated 1.3.97, for giving the concessional rate. In other
words, the benefit of the concessional rate for edible oils was to be given so
long as the oil imported was used for edible purposes even after refining.
5.
In the context of the existing tax structure in terms of notification
No.17/2001-Cus, Government has consciously provided for a concessional rate of
35% duty for oils used other than for edible purposes. Thus if it can be
established by the importing industry/trade that the oil imported as such is not
fit for human consumption, (and needs to be refined before it can possibly be
made fit for human consumption) and actually it is not being subjected to
refining for edible use but on the other hand it is used for industrial
purposes, it will not be proper to deny the benefit of lower concessional rate
of 35%. The onus of proving the actual final use could be put on the importer of
such crude palm oil wherever he claims that the consignment of crude palm oil
which does not satisfy straightaway the conditions of edible grade crude palm
oil under PFA Act, 1954, will not be refined for edible use but is actually used
for industrial purpose after Customs clearance. In fact, if it is viewed that
crude palm oil containing free fatty acids, acid value higher than the limits
prescribed under the PFA Act, 1954 falls in the category of the edible grade,
because it can be subsequently refined to make it fit for human consumption,
then the concessional rate provided under serial number 29 of the table annexed
to the notification 17/2001 may be redundant & would defeat the intention of
the Government for giving the concessional duty for crude oils used for
industrial purposes & not for edible purposes.
6.
In view of the above, and with a view to ensure that the benefit of the
concessional rate of 35% where claimed for crude oils is extended only where the
actual use is shown to be for industrial application to the satisfaction of the
proper officer, the following procedure/ guidelines may be followed:-
|
(a) |
For
consignments of vegetable oils, where the importers claim concessional
rate of duty of 35% as applicable for oils other than edible oils, samples
may be sent for testing to see whether the oil conforms to standards of
PFA Act, 1954. If it is found that the vegetable oil conforms to the
standards of PFA, 1954, the higher effective duty for edible oils only be
charged & lower rate denied, apart from taking suitable action for
misdeclaration etc.; |
|
(b) |
In
case on test, it is found that vegetable oil does not conform to the
standards of PFA Act, 1954 and acid value & free fatty acid are higher
than the permissible limits (i.e. acid value exceeds 10%) the consignments
may be assessed provisionally at the rate claimed, i.e., 35% and allowed
to be moved on execution of a bond for establishing the end use of the oil
for actual manufacture of soap or other industrial use as claimed. The
bond should cover the differential duty liability between the industrial
and edible grade oil. In case, import is by an actual user manufacturer, a
security/bank guarantee amounting to 25% of the bond value may be taken.
However, where the import is not for actual use but for trading and sale
to actual industrial users, the concessional rate may be extended on
provisional basis but the amount of security/bank guarantee should be
equal to bond value, i.e. 100% of differential duty liability between the
industrial and edible grade oil. |
|
(c) |
The
bond shall be discharged and security/bank guarantee released when the
actual end use certificate from the Assistant/Deputy Commissioner of
Central Excise having the jurisdiction over the factories of soap
manufacturers (or other industrial applications for which the vegetable
oil is claimed to have been used), is produced to the Customs authorities
within
a period of 3 months or a period as may be extended by the
Commissioner of Customs on being requested by the importers. In case, such
certificate is not produced to Customs within 3 months or period as
extended by the Commissioner of Customs, immediate recovery action of
differential amount be initiated. |
7.
The above said instructions may be brought to the notice of all concerned by
issuing suitable Public Notice and Standing Order.
8.
Difficulties, if any, in implementation of this circular may be brought to the
notice of the Board. Kindly acknowledge receipt of the circular.
|
Sd/- |
|
(Rajendra
Singh) |
|
Under
Secretary to the Govt. of India |