TaxTMI 
TaxTMI 
2019 (8) TMI 1938
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....nder notification No. 53/2003 dated 01.04.2003. Also under challenge is the Circular No. 10/2004-Cus dated 30th January 2004, by virtue of which the Department of Revenue issued a clarification regarding restrictions on import of agriculture and dairy products, occurring in Clause (ii)(c) of Notification of 01.04.2003. The clarification issued suggested that the term "agriculture and dairy products" shall mean that import of all types of products derived from agriculture/dairy origin including crude edible oil shall not be permitted. According to the petitioner the scope of the term "agriculture and dairy products" cannot be widened or enlarged by a circular, so as to add something in the Notification providing for exemption. 2 The challenge to the order and the clarificatory circular arises in the background of the following facts: 2.1 The petitioner is a government recognized Two Star Export House and a trading company engaged in the export of rice, sesame seeds, soyabean meal extract etc. Under the Exim Policy of 2002-2007 which provides for exempting goods, when imported into India under a Duty Free Credit Entitlement Certificate, the petitioner has been granted the "DFCE....
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....ers 1-24 of ITC (HS) are not allowed for imports under Duty Free Entitlement Certificate. In terms of the para 3.2.5 inserted in the Handbook of Procedures, import of agricultural product namely all edible oils classified under chapter 15 of ITC(HS) classification of Export and Import Items made through STC and MMTC was eligible to claim duty free exemption and since the petitioner was importing oils through MMTC, it was entitled to exemption under the DFCE Scheme. In the response to the show cause notice, the petitioner, in detail, explained the process of manufacture of Crude Soyabean Oil to suggest that on undergoing the manufacturing process, it becomes a distinctly marketable commodity and therefore looses the identity of Soyabean as an agricultural product. 2.4 On the second limb of the show cause notice, regarding the nexus of the product group exported, reliance was placed on para 3.2.6A (ii) and (iii) of the Handbook of Procedures. Reliance was also placed on a clarificatory circular dated 05.10.2005 which would suggest that products at serial Nos. 1 to 10 of Appendix ITD can form the relevant product category and since "Food Products" falls in one of the categories no.....
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....led to exemption. Only goods which were agricultural and dairy products were not entitled for such exemption. Once the notification specified the scope of exclusion, the Circular dated 30.01.2004, was illegal, as no clarificatory circular could be issued enlarging or widening the scope of exclusion. (ii) Mr. Modh has invited our attention to the contents of the reply to the show-cause notice to contend that Crude Degummed Soyabean Oil can by no means be said to be an agricultural product. The process of manufacture is explained in detail and is undertaken in 4 stages and also explained by way of a diagram at page 71 of the paper book. The submission is that after undergoing a process of manufacture, the product gets transformed into a new article and becomes a distinct marketable entity which certainly cannot be termed to be an agricultural product. Reliance was placed on the decision of the Supreme Court in the case of CIT vs. Cynamid India Ltd., reported in (1999) 3 SCC 727 in support of his contention that product remains an agricultural product if as in the facts of that case dehusking is not an industrial production. When the product loses its original identity, the e....
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.....01.2004. Attention was invited to the insertion made in para 3.2.5 of the Handbook of Procedures, particularly to para 3.2.6 A (ii) which provided that goods allowed to be imported under this Scheme i.e. under DFCE Scheme shall have a nexus with the products exported and or declaration in this regard shall be made by the applicant in Appendix 17D. Our attention was also drawn to para 3 of the public notice that imports of agricultural products which fall under Chapters 1-24 of ITC (HS) Classification of Export and Import Items will not be allowed. However, the said public notice dated 25.01.2004 was amended by one dated 06.01.2005, wherein import of all edible oils classified under chapter 15 of ITC (HS) classification of Export and Import items shall be allowed under the scheme only though STC and MMTC. The petitioner had so imported such oil through MMTC. Mr. Modh, in continuation further submitted that, as representations were received from trade and industry to clarify the scope and meaning of nexus with the product group, as contained in para 3.2.6 A, product group at serial No. 1 to 10 of Appendix 17 D, any input listed in the relevant product group of SION Group shall be wi....
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....e the provision of sub-section (5) of section 3 of the Tariff Act would be deemed to be on the statute book on the date of certificate and even otherwise omitted with effect from 13.05.2005. (vii) As far as the finding of the question of Crude Soyabean Oil figuring at item E-121 as against the export of refined soyabean oil (edible grade) and not corresponding to the export of the petitioner is concerned, Mr. Modh contended that what is imported is Crude Soyabean Oil and the extract from the manufacturing process of such oil would be soyabean oil extract and therefore nexus is evident. Drawing our attention to the Input Output norms, Mr Modh submitted that undisputedly what was imported was crude soyabean oil and refined soyabean oil export was a food product. 5. Mr. Nirzar Desai, learned advocate has appeared for the Union of India and made the followinig submissions: (a) The Circular dated 30.01.2004 is only a clarifactory circular and does not tend to interpret or widen the scope of the terminology "agricultural and dairy products". Taking us through the contents of the Circular dated 30.01.2004 (Annexure 'L'), Mr. Desai submitted that as the DGFT sought a c....
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....an agricultural product nor a manufactured product. The affidavit-in-reply filed by one Farah I Gupta, Assistant Commissioner (G.r VII) Customs House, Kandla, when read reveals that it reiterates the contentions of the impugned order dated 09.01.2007. It is submitted that assuming without admitting that from soyabean the final product of soyabean crude edible oil can be said to be manufacturing process and therefore final product of soyabean crude oil would fall within the scope and ambit of agricultural product as it undergoes a process but then also in view of the decision of the Apex Court in the case of Shyam Oil Cake Ltd. vs. Collector of Central Excise, Jaipur reported in 2004 (174) ELT 145 SC, soya bean crude oil can be said to be an agricultural product. (d) Executive instructions can supplement a statute or cover areas to which the statute does not extend but it cannot run contrary to the statutory provisions or whittle down their effect. In support of this submission, he has relied on a decision of the Apex Court in the case Joint Committee of Airline Pilots Asso. vs. Director General of Civil Aviation. It is submitted that the aforesaid facts go to show that adm....
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.....5 crore (in foreign exchange). Such status holders shall be entitled to duty free credit entitlement certificate to the extent of 10% of the incremental growth in exports. The duty free credit entitlement can be used for import of capital goods, office equipments and inputs, provided the same is freely importable under ITC (HS). A notification dated 28.01.2004 was issued by the Ministry of Commerce & Industry, Department of Commerce as per which the EXIM policy was announced with the specific objective of accelerating the incremental growth in exports and to facilitate India emerge as a major base for sourcing different products and services for the rest of the world. It was recognised that the status holders would continue playing a significant and increasing role in boosting exports. Keeping this in view, duty free entitlement at 10% of incremental growth in the value of exports was allowed. Looking to representations received from various trade associations as well as individual exporters seeking clarifications on various points, notes were inserted in paragraph 3.7.2.1 of Chapter 3. However, what is evident is that the goods that needed to be imported, keeping in mind the grow....
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....e is importing Crude Degummed Soyabean Oil. Apart from the contention that it is not an agricultural product, the alternative plea is that even if it is so, since it is imported through MMTC, the same is an import of edible oil classified under Chapter 15 of ITC (HS) and therefore permissible. From the diagram describing the manufacturing process at page 71 of the petition what is evident is that the basic ingredient/ root of the product is soyabean. It is even not so disputed by the petitioner that soyabean is an agricultural product. What is sought to be canvassed is that after undergoing the process of manufacture, the crude degummed soyabean oil becomes a distinct commodity. The process which is undertaken though may be termed as a manufacturing process but what is to be seen is that soyabean as an agricultural product is a primary product which undergoes a simple operation so as to make it more useable or saleable. It can in no way be said to acquire a distinct identity. 9.1 Soyabean on extraction of oil, unlike eucalyptus oil as in the case of C.I.T vs. Stanes Amalgamated Estates Ltd., (supra), does not lose its identity. From the test report produced along with the affida....
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.... origin are not permitted to be imported. The clarification is of the Exim Policy. 10. The second ground based on which the assessee has failed is that the authority has held that the goods allowed to be imported, in this case, Crude Degummed Soyabean Oil has no nexus with the product group exported. On facts, it is found that the petitioner was exporting non-basmati rice (E/38); sesame seeds (E/93), white sugar (E/52/79) and Soyabean Meal Extract (E/42) as food products as seen from condition sheet. The SION norms as per Handbook Procedure found that for the export products of the petitioner what was the import product was anything except crude degummed soyabean oil. The defence that for the export of refined soyabean oil (edible oil) the product importable was Crude Soyabean Oil which figured at E-121 is also not covered as what is exported is not soyabean refined oil after undergoing chemical modification but it is only Soyabean Meal Extract. Even the Test Report of the laboratory vindicates the stand of the department. Even the argument of the petitioner therefore that the crude oil is being imported through MMTC, would not be of any help to the petitioner. 11. Reliance p....
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....ing reprocessed as Crude degummed Soyabean Oil, it does not become a distinct product. There is no chemical modification and it is not an edible oil as evidenced from the tests report. It, therefore, essentially retains the characteristic of an agricultural product. In this regard, it shall be worthwhile to reproduce the decision of the Apex Court in the case of Shyam Oil Cake Ltd. (supra) which reads as under: "16. Thus, the amended definition enlarges the scope of manufacture by roping in processes which may or may not strictly amount to manufacture provided those processes are specified in the Section or Chapter notes of the Tariff Schedule as amounting to manufacture. It is clear that the Legislature realised that it was not possible to put in an exhaustive list of various processes but that some methodology was required for declaring that a particular process amounted to manufacture. The language of the amended Section 2(f) indicates that what is required is not just specification of the goods but a specification of the process and a declaration that the same amounts to manufacture. Of course, the specification must be in relation to any goods. " 13.1 Precisely to ....