1. This appeal arose on account of a demand for Rs. 2923 by the Superintendent of Central Excise, Range IV, Division V, Bombay C. No.CEXA/CS-IV/ TATA/2355 dated 12-9-74 on Tata Oil Mills Ltd., Bombay.
This amount was demanded as duty on the V.N.E. Oil of 29.230 tonnes which the mills are said to have produced between January, 1974 and July, 1974. In his order No. V (12) 2-16/75/1677 dated 29-1-76, the Appellate Collector of Central Excise, Bombay confirmed the order of the Assistant Collector and came to the finding that the duty on V.N.E.Oil had to be paid by the appellants.
2. Under notification No. 33/63-Central Excise, V.N.E. Oils used in the manufacture of goods falling under Items 13, 14 and 15 of the Central Excise Tariff were exempted from duty. The notification also has a proviso that the exemption is not applicable if the finished products were not liable to excise duty or chargeable to nil rate of duty. The mills after processing the oil, hardens it to obtain vegetable tallow referred to as Hardened Technical Oil. This Hardened Technical Oil is taken from the factory at Bombay to their soap making factory at Calcutta for manufacture into soap. The hardened oil is moved to Calcutta under Chapter X procedure of the Central Excise Rules. The Assistant Collector held that since the vegetable tallow which he considered to fall under tariff item 13 was cleared without payment of duty, the clearance was affected by the proviso to notification 33/63-Central Excise which prohibits exemption on V.N.E. Oil if not used in the manufacture of finished products which are leviable to duty. He considered that vegetable tallow was a finished excisable product by itself. The mills, however, contend that the end-product being soap on which appropriate duty had been paid, the proviso was not applicable to this case and therefore the V.N.E. Oil was rightfully entitled to exemption under the notification. The appellants also claimed that their vegetable tallow was outside the tariff definition of vegetable product since it had been hardened to a melting point of above 45C.3. In his order dated 29-1-76, the Appellate Collector says "they have also admitted that this H.T.O. was used in the manufacture of soap and that in the removal of H.T.O. from their factory, procedure prescribed under Chapter X of Central Excise Rules was followed." There is, therefore, no need for this Tribunal to determine whether the hardened oil was in fact used in the manufacture of soap since this is an admitted fact which the Department does not controvert. Furthermore, the mills' claim that the hardened oil was moved to Calcutta under Chapter X of Central Excise Rules is also expressly accepted by the department. Under this Chapter, certain exemptions are given to excisable goods when they are moved to another factory to be used in further manufacture of other excisable goods. Here, the hardened oil was moved to Calcutta for the manufacture of soap. Because the movement under Chapter X was made without the goods being levied to duty, the department held that the proviso to notification 33/63-Central Excise disentitled their raw material i.e. VNE oil which was used in the manufacture of the tallow, from exemption under that notification.
4. We consider that there has been an error in the interpretation of notification 33/63-Central Excise. The purpose of the notification is to grant exemption to V.N.E. oil used in the manufacture of excisable goods on which duty is recovered. If the interpretation by the department is taken to its logical conclusion, then the notification is unworkable when the V.N.E. oil is used in the manufacture of soap because no such manufacture is possible unless the V.N.E. oil is first hardened. The mill has claimed that when V.N.E. oil after hardening is used in the same factory for manufacture of soap, duty is not recovered on it and this claim has not been disputed by the department. Even otherwise if one follows the department's interpretation it will follow that the vegetable non-essential oil will be given exemption only to the extent of manufacture of tallow, which would then have to be levied to duty. Exemption on the V.N.E. oil when it is ultimately used in the manufacture of soap will thus be effectively barred.
5. It may be true that hardened oil is a finished product which can be sold but for the purpose of this vegetable non-essential oil with which we are concerned here, the hardened oil was not the finished product.
The finished product was clearly soap. We have seen that the manufacture of V.N.E. oil into hardened oil and eventually into soap is an established fact. We can see no logic in saying that the soap is not the finished product that arose from the processing of the V.N.E. oil first into hardened oil and then into soap. We accordingly direct that the vegetable non-essential oil should be assessed free of duty and refund given, if the sum demanded has been paid by the mill.
6. A question arose during the proceeding before the department that the hardened oil referred to as Hardened Technical Oil or H.T.O. was not a product assessable under Item No. 13 of Central Excise Tariff because its melting point was about 45C. This claim of the factory was rejected by the Appellate Collector in the following words : "The appellants have argued that the melting point of H.T.O. is about 45C and therefore this product is not fit for human consumption and therefore cannot fall under Tariff Item 13. It is pointed out that the appellants have followed Chapter X procedure in clearing vegetable tallow or H.T.O. from their factory to Calcutta and have thereby availed the concession available to vegetable product under notification No. CER-8(3)/56-C.E., dated 31-1-56 which exempts vegetable product from payment of duty if used in the manufacture of soap provided the procedure set up under Chapter X is followed. They therefore cannot argue that their product H.T.O. is not vegetable product. Even if it is accepted for the sake of argument that their product does not fall under Tariff Item 13, the position that would result would be that H.T.O. is non-excisable." The argument is as unconvincing as it is half-hearted because if the vegetable tallow was not assessable under Item 13, Chapter X procedure should not have been allowed by the Central Excise Department under Notification No. CER-8(3)/56-CE. But having argued that H.T.O. was excisable, the department had no justification in denying the exemption to the V.N.E. oil on the ground that the hardened vegetable tallow was not excisable. The department seems to have been in two minds as to whether the vegetable tallow was excisable under Item 13 or not and could not make up its mind in regard to the reason for which denial of the exemption should be made i.e. whether to deny it because the vegetable tallow was not excisable or whether to deny it because it had moved under Chapter X procedure without payment of duty. However, in view of our admission of the appeal, we will not go into this question whether the hardened vegetable tallow in this case was excisable under Tariff Item 13 or not especially when the question is not a dispute before us.
7. I have had the advantage of a careful perusal of the Order proposed to be made by my learned brothers in this transferred proceeding [heard as an appeal pursuant to Section 35(P) of the Central Excises and Salt Act, 1944].
8. I regret, however, my respectful inability to agree should have made it necessary to pronounce a dissenting Order.
9. The facts are not much in dispute and do not require to be recapitulated, It is, however, of the utmost importance to emphasize that- (a) there has been a concurrent finding by the Assistant Collector as well as by the Appellate Collector to the effect that the product manufactured by the Appellant in the factory at Sewri conformed to the description and specification of "Vegetable Product" in item 13 of the 1st Schedule to the Central Excises and Salt Act, 1944. [Para 3 of the Asstt. Collector's Order and para 4 of the Order of the Appellate Collector] ; (b) the aforesaid finding had not been assailed in the grounds for the Revision Petition heard by us as an appeal ; (c) indeed, the contention that the product manufactured did not conform to item 13 of the 1st Schedule to the Central Excises and Salt Act, 1944, since it was unfit for human consumption, is conspicuous by its absence in the memorandum of grounds for Revision ; (d) it was fairly conceded by Shri K.R. Mehta, the learned counsel for the Appellant, that the product in question did conform to item 13 of the 1st Schedule to the Act ; (e) the aforesaid concurrent finding, in the circumstances, became conclusive ; and (f) admittedly, no duty was paid by the Appellant on the product in question notwithstanding that it was "finished excisable goods" conforming to item 13 of the 1st Schedule to the Act.
10. It is against the backdrop of the conclusive and hence irrefutable fact that the goods in question conform to the description contained in item 13 of the 1st Schedule to the Act, that the instant appeal has to be decided. To hold either that- (a) the goods in question are not excisable products in terms of Item 13, because they were unfit for human consumption ; or (b) the finished product was soap and not the goods in question. is to fly in the face of the conclusive findings as well as the admission at the bar.
11. Once this were so, all that is necessary is to examine the applicability of the benefit of exemption in the relevant notification, in the context of- (a) the process carried on in relation to vegetable non-essential oil, thereby rendering it exigible to- duty under item 12 of the 1st Schedule to the Act ; (b) the production of "finished excisable goods" conforming to item 13 of the 1st Schedule and exigible thereunder ; and (c) the ultimate manufacture of soap assessable to duty under item 14 of the 1st Schedule to the Act.
12. The notification in question exempts processed vegetable non-essential oil falling under item 12 of the 1st Schedule from the whole of the duty leviable thereunder, if it is used in the manufacture of goods falling under items 13, 14 or 15 of the said Schedule. In terms of the second proviso in the notification in question, the exemption is not attracted if the "finished excisable products" falling under items 13, 14 or 15 are themselves "exempted from the whole of the duty of excise leviable thereon or are chargeable to nil rate of duty." 13. By resort to the procedure prescribed in Chapter X of the Central Excise Rules, the Appellant removed the goods in question, admittedly assessable to duty under item 13 of the 1st Schedule, without payment of duty, for manufacture of soap-item 14 of the said Schedule. In effect, therefore, the goods in question were assessed to nil rate of duty, although duty was payable under item 13. They now contend that since they paid duty on soap falling within item 14, they are eligible to the benefit of exemption of the duty payable under item 12-processed V.N.E. Oil-notwithstanding the avoidance of duty under item 13. In other words, because the ultimate product soap was dutiable and duty was paid, no duty is payable either under item 12, or item 13 and this notwithstanding that they have not paid the duty leviable on the intermediate excisable goods falling under item 13.
14. The contention has only to be stated to be rejected. The intent of the notification is not to exempt "finished excisable goods" falling under item 12 as well as item 13 if ultimately goods conforming to item 14 are manufactured and duty paid thereon. If that were the intent, there is hardly any necessity for a specific mention of goods conforming to item 13 of the 1st Schedule in the notification. In fact, the specific inclusion of item 13 in the notification would defeat the very purpose of exempting goods under item 12 when used for the manufacture of soap-item 14-regardless of the production of other intermediate "finished excisable goods". Such specific mention of item 13 cannot be wished away. Nor is it contended that it is impossible to manufacture soap, unless goods conforming to item 13 of the 1st Schedule are manufactured in the first instance. That the benefit of the exemption is effectively barred for the ultimate product, namely, soap (item 14), unless the intermediate manufacture of "finished excisable goods", exigible to duty in terms of item 13, is ignored altogether is incomprehensible. If the intermediate product was not assessable to duty in terms of item 13, of the 1st Schedule-being unfit for human consumption-a contention that was feebly attempted before the Appellate Collector but no longer urged in the Revision-it is inconceivable how the benefit of the exemption cannot be availed of in the manufacture of soap. This was the ratio of the unreported decision of the Hon'ble Justice Parek of the Bombay High Court in Misc. Petition No. 1402 of 1975, (Tata Oil Mills Co. Ltd. v. Union of India), cited before us (Para 6 of the photo-copy filed before us does not appear to be correct or complete because the notification is extracted while what was intended was the reproduction of item 12 of the 1st Schedule to the Act). The case in hand, on the contrary, is governed by the judgment reported in 1980 ELT 704 (Bombay) (Indian Vegetable Products Ltd. v.Union of India) referred to and distinguished in the aforesaid unreported decision in the Tata Oil Mills case. ' The distinction drawn was precisely that in the case in 1980 ELT 704, the intermediate product was covered by item 13.
15. In the premises, following respectfully, the ratio of the decision in 1980 ELT 704, the Revision has no merits and deserves to be dismissed and I accordingly propose an order of dismissal.