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Collector of C. Ex. Vs. Hindustan Lever Ltd. - Court Judgment

LegalCrystal Citation
CourtCustoms Excise and Service Tax Appellate Tribunal CESTAT Delhi
Decided On
Reported in(1989)(44)ELT381TriDel
AppellantCollector of C. Ex.
RespondentHindustan Lever Ltd.
Excerpt:
.....non-essential (vne) oil used in the manufacture of vegetable tallow would be ineligible for the duty exemption under the said notification.2. the facts of the case, briefly stated, are that hindustan lever processed 122.02 mt of v.n.e. oils and converted this into vegetable tallow by hydrogenation process. they cleared this vegetable tallow at nil rate of duty under notification no. cer-8(3)/56-c.e., dated 14-1-1956. the second proviso to notification no. 33/63-c.e., dated 1-3-1963, as amended from time to time, provides that the exemption in this notification will be available only to those oils which are used in the manufacture of finished excisable goods which do not enjoy exemption from the whole of the duty of excise leviable thereon or which do not have nil rate of duty. since.....
Judgment:
1. This case has arisen out of a show cause notice (bearing F.No.198/B/5/15/77-CX-V, dated 8-2-1977 issued under Section 36(2) of the Central Excises and Salt Act, 1944 by the Central Government. The notice proposed to set aside the Order-in-Appeal No. V(12)2-10/75, dated 20-2-1976 passed by die Appellate Collector of Central Excise, Bombay and to restore the Assistant Collector's order. In effect, the proposal was to pass an order holding that the proviso to Central Excise Notification No. 33/63 would be attracted in the instant case and vegetable non-essential (VNE) oil used in the manufacture of vegetable tallow would be ineligible for the duty exemption under the said notification.

2. The facts of the case, briefly stated, are that Hindustan Lever processed 122.02 MT of V.N.E. oils and converted this into vegetable tallow by hydrogenation process. They cleared this vegetable tallow at nil rate of duty under Notification No. CER-8(3)/56-C.E., dated 14-1-1956. The second proviso to Notification No. 33/63-C.E., dated 1-3-1963, as amended from time to time, provides that the exemption in this notification will be available only to those oils which are used in the manufacture of finished excisable goods which do not enjoy exemption from the whole of the duty of excise leviable thereon or which do not have nil rate of duty. Since the party's product vegetable tallow was cleared after availing full exemption under Notification No.CER-8(3)/56-C.E. of 14-1-1956 the Assistant Collector held that the exemption to VNE oils contemplated vide Notification No. 33/63 will not be available because of the restriction imposed by the proviso discussed above to that Notification. Accordingly a demand of duty for Rs. 12202/- payable on the processed V.N.E. oil was confirmed by the Assistant Collector.

M/s. Hindustan Lever contended before the Appellant Collector that the vegetable tallow cleared from their Bombay factory was in fact sent to their own factory at Calcutta for the purpose of manufacturing soaps falling under Tariff Item 15. It was aruged that both the factories were sister concerns and the vegetable tallow cleared by one factory for the manufacture of soap in the other should be treated to be an intermediate product and not a finished product. In that event it was emphasised that the proviso to Notification No. 33/63-C.E. which places restriction only when the finished excisable goods are exempted or have nil rate of duty will not be applicable to the facts of this case. The Appellate Collector accepted their contention and directed the Assistant Collector that if he is satisfied that the tallow has been used in the manufacture of soap by the same manufacturer and if the soap was cleared on payment of duty the exemption of Notification No.33/63 would be available to the V.N.E. oil used in the manufacture of the vegetable tallow and in subsequent manufacture of soap.

3. The reason disclosed in the show cause notice issued by the Government is that vegetable tallow was itself a finished excisable product within the meaning of entry No. 13 of the Central Excise Tariff (CET) and once it is cleared after availing of exemption from the whole of the duty of excise, in terms of the proviso to Notification No.33/63, the exemption provided to VNE oils used in the manufacture of vegetable tallow would not be available. It also said that the fact that soap had been manufactured by the same manufacturer in another factory and cleared on payment of duty was not relevant because soap came into existence at a subsequent stage.

4. In their reply dated 17-3-1977, Hindustan Lever denied the allegations and contested the notice.

5. On the constitution of this Tribunal, these proceedings came to be transferred to this Tribunal for disposal as an appeal.

6. We have heard Shri A.K. Jain, SDR, for the Appellant and Shri M.S.Gupta, for the Respondents. We have also perused the record.

7. At the outset, the learned SDR drew out attention to our Order No 70/84-C in Appeal No. 72/75-C [1984 (17) E.L.T. 166 (Tribunal)] filed by Hindustan Lever and Order No. 150/84-Q in Appeal No. 275/77-C which was, as a matter of fact, transferred review proceedings (as in the present case) initiated by the Central Government against Hindustan Lever. Though both these orders, involving exactly the same issue as in the present case, had gone against the Revenue, the SDR said he would like to make some points. He laid emphasis on the explanation appearing in Notification No. 33/63 which said - "For the purpose of this notification, processed vegetable non-essential oil means a vegetable non-essential oil which has undergone, subsequent to its extraction, any one or more of the following processes, namely :- This, according to Shri Jain, meant that if the VNE oil had undergone any process other than the 3 specified ones, such oil would not be "processed" VNE oil for the purpose of the notification. In the present case, the oil had undergone the process of hydrogenation. It was, therefore, not "processed" VNE oil though it maybe "VNE oil, all sorts". When the Counsel for Hindustan Lever pointed out that this ground was being put forth for the first time now, the SDR agreed it was so.

8. The learned Cousnel for Hindustan Lever submitted that their VNE oil was subjected to the process of bleaching, one of the specified processes. This submission in the memorandum of appeal before the Appellate Collector has not been denied by the Deptt. If such oil had undergone any additional processes, it would not cease to be "processed" VNE oil.

9. We have carefully considered the submissions. We do not find much force in the contention that the explanation must be construed in such a way that a VNE oil, even if it has undergone one or more of the three specified processes, must be deemed to be no longer a "processed" VNE oil, if it had undergone also a non-specified process such as hydrogenation. In our view, the three processes have been specified so that unless one or more of these processes had been gone through, the VNE oil would not qualify to be called "processed oil". To contrue the explanation in any other manner would be artificially narrowing down its scope. If such indeed was the intention, we should have found words expressing such intention to exclude VNE oils which, in addition to one or more of the specified processes, have undergone - as in the present case - another process, e.g. hydrogenation.

10. For the rest, the issue involved in the present case stands squarely covered by our two decisions in Appeals Nos. 72/1975-C and 275/1977(C). Following those decisions, we set aside the show cause notice, dated 8-2-1977 issued by the Central Government and uphold the Appellate Collector's order dated 20-2-1976.


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