High Court rules palmolein not exempt from additional duty under Customs Tariff Act

TATA OIL MILLS COMPANY LIMITED Versus UNION OF INDIA

TATA OIL MILLS COMPANY LIMITED Versus UNION OF INDIA - 1990 (47) E.L.T. 259 (Mad.) Issues Involved:
1. Validity of the explanation to Section 3(1) of the Customs Tariff Act.
2. Whether palmolein is exempt from additional duty under Section 3 of the Customs Tariff Act based on Notification No. 150/64-C.E., dated 19-9-1964.

Detailed Analysis:

1. Validity of the Explanation to Section 3(1) of the Customs Tariff Act:
The petitioner challenged the validity of the explanation to Section 3(1) of the Customs Tariff Act, 1975, arguing it was unconstitutional. However, the petitioner acknowledged that the Supreme Court's decision in Khandelwal Metal & Engg. Works v. Union of India ([1985 (20) E.L.T. 222 (S.C.) = AIR 1985 S.C. 1211]) had already addressed this issue. The Supreme Court held that Section 3(1) of the Customs Tariff Act is not an independent charging section but rather uses the excise duty as a measure for additional duty on imported articles. The explanation to Section 3(1) provides a dictionary for its interpretation and is not unconstitutional. Consequently, the High Court dismissed W.P. No. 799 of 1982, upholding the explanation's validity.

2. Exemption of Palmolein from Additional Duty:
The petitioner, a manufacturer of Vanaspathy and other edible oils, imported palmolein and paid additional duty under protest, subsequently filing for a refund. The Assistant Collector, Appellate Collector, and the Government rejected the refund applications, stating that the exemption under Notification No. 150/64-C.E., dated 19-9-1964, applied only to palm oil and not to palmolein.

The petitioner argued that palmolein is a derivative of palm oil and should be considered the same for exemption purposes. The petitioner relied on Notification No. 150/64-C.E., which exempts palm oil from excise duty, and contended that this exemption should extend to palmolein, as palmolein is obtained by fractionation of palm oil without any chemical change.

The High Court examined the distinction between palm oil and palmolein. It noted that palmolein is produced by a manufacturing process called fractionation, which separates stearin from palm oil, resulting in a product with different physical and chemical properties. The court referred to the ISI specifications, which prescribe different standards for palm oil and palmolein, indicating they are distinct commodities.

The petitioner cited several cases, including Thungabhadra Industries v. Commercial Tax Officer (AIR 1961 S.C. 412), to support the argument that palmolein should be considered the same as palm oil. However, the court found these cases inapplicable as they dealt with different contexts under the Sales Tax Act.

The court also considered the Government's practice of treating palm oil and palmolein as distinct commodities, evidenced by the issuance of separate notifications for their exemption. Specifically, Notification No. 42-Cus., dated 1-3-1979, granted exemption from additional duty to both palm oil and palmolein, which would have been unnecessary if they were considered the same product.

The High Court concluded that palmolein and palm oil are not identical, and the exemption under Notification No. 150/64-C.E. does not extend to palmolein. Therefore, the additional duty levied under Section 3 of the Customs Tariff Act on palmolein was valid, and the petitioner's claim for a refund was dismissed.

Conclusion:
The High Court dismissed both writ petitions filed by the petitioner. The explanation to Section 3(1) of the Customs Tariff Act was upheld as constitutional, and palmolein was not exempt from additional duty under Notification No. 150/64-C.E., dated 19-9-1964, as it is a distinct commodity from palm oil.