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Vital and Vital Oil Pvt. Limited Vs. Collector of Central Excise - Court Judgment

LegalCrystal Citation
CourtCustoms Excise and Service Tax Appellate Tribunal CESTAT Delhi
Decided On
Reported in(1985)(5)LC1601Tri(Delhi)
AppellantVital and Vital Oil Pvt. Limited
RespondentCollector of Central Excise
Excerpt:
1. the appellants, m/s. vital and vital oil pvt. limited had obtained licence in form l-4 for manufacture of vegetable non-essential oils, the licence specifying that it extends only to the manufacture of vegetable non-essential oils comprised in tariff item 12 of the central excise tariff. by letter dated 12-5-1982 they had requested for addition of hardened rice bran oil, hardened castor oil and hardened linseed oil, to the licence already issued, stating that these items are vegetable non-essential oils for industrial consumption/use only and not for human consumption. the superintendent of central excise wrote to them under letter dated 14-5-1982 that these three products would fall under tariff item 68 of the central excise tariff. by letter dated 18-5-1982 the appellants claimed.....
Judgment:
1. The appellants, M/s. Vital and Vital Oil Pvt. Limited had obtained licence in Form L-4 for manufacture of Vegetable Non-essential oils, the licence specifying that it extends only to the manufacture of vegetable non-essential oils comprised in Tariff Item 12 of the Central Excise Tariff. By letter dated 12-5-1982 they had requested for addition of hardened rice bran oil, hardened castor oil and hardened linseed oil, to the licence already issued, stating that these items are vegetable non-essential oils for industrial consumption/use only and not for human consumption. The Superintendent of Central Excise wrote to them under letter dated 14-5-1982 that these three products would fall under Tariff Item 68 of the Central Excise Tariff. By letter dated 18-5-1982 the appellants claimed that the three products would be classifiable under Tariff Item 12 only and the reliance of the Superintendent upon the Notification No. 33/63-Central Excise, dated 1-3-1963 as amended was not proper. They enclosed with said letter the details of the process for manufacture of these three commodities and contended that they continued to be vegetable non-essential oil only in spite of this process. When they tiled classification list for the said three items uncles Tariff Item 12 the Assistant Collector held adjudication and thereafter passed an order dated 27-6-1983 classifying these three commodities under Tariff Item 68. The appeal against the said order was rejected by the Collector of Central Excise (Appeals) under order dated 2-3-1984. This appeal is against the order dated 2-3-1984.

2. Sri G.S. Jetly, Advocate along with Shri Ajit Bhosme, Advocate, appeared for the appellants, the respondent being represented, by Shri V. Lakshmi Kumaran, S.D.R.3. We have carefully considered the submissions of both sides. In the Tungabadra Industries case 1960 Vol. 11 STC 827 the Supreme Court dealt with the question whether hydrogenated groundnut oil continued, even after hydrogenation, to be groundnut oil only within the meaning of Rule 18(2) of the Madras General Sales Tax (Turn Over and Assessment) Rules, 1939. The Court took into consideration the process undergone by the groundnut oil during hydrogenation and took note of the fact that an inter-molecular or con-ligurational chemical change takes place which results in the hardening of the oil but held that in spite of such, a chemical change the product continued to he groundnut oil only, It held that in its essential nature no change had occurred and it remained an oil-glyceride of fatty acids- that it was when it issued out of the press. They held that hydrogenated oil continued to be groundnut oil notwithstanding the processing, which was merely for the purpose of rendering the oil more stable, thus improving its keeping qualities for those who desire to consume groundnut oil.

4. The oils in question in the present appeal are non-edible hardened oils, said to have passed beyond the stage of mere hydrogenation, having been hardened for industrial purposes. This Tribunal had in the cases of Hindustan Lever Limited L1984 (17) E.L.T. 166 and Jayalakshmi Cotton & Oil Products Limited (1984 ECR 1795) considered cases of hardened oils for industrial purposes and had held that they were VNE oils falling under Tariff Item 12 only and not under Tariff Item 68.

But Shri Lakshmi Kumaran points out that this Tribunal had in the earlier decision of Veg Oils Limited (1983 E.L.T. 1822) held that extra hardened technical oil will have to be classified under Tariff Item 68 and not under Tariff Item 12. Shri Lakshmi Kumaran points out that the said decision had been rendered having taken into consideration the judgment of the Supreme Court also (cited supra) that the latter two decisions relied on by the appellants had not considered the decision in 1983 E.L.T. 1822. He, therefore, contends that now this case should be decided following the decision in 1983 E.L.T. 1822 or, at any rate, this would be a proper case for referring the matter to a Special Bench consisting of more than three Members to resolve the conflict between the decisions of the Tribunal mentioned earlier.

5. It may be seen that the Bench which passed the decision reported in 1983 E.L.T. 1822 had referred to the decision of the Gujarat High Court reported in 1980 E.L.T. 435 as also a decision of the Govt. of India and had rendered its decision accordingly. In this decision of the Govt. of India the earlier decision of the Supreme Court in the Tungabadra Industries case is noted to have been considered but distinguished. In making the distinction the Govt. of India appeared to have held-(a) that if the Supreme Court judgment. is made directly applicable to the Central Excises and Salt Act also then Tariff Item 13 would be rendered nugatory and (b) hardened oils with melting point above 45C would be recognised as a commodity distinct from vegetable oils.

6. But the above two distinctions sought to be made by the Govt. of India in construing the decision of the Supreme Court do not .appear to be proper. Tariff Item 13 deals with vegetable products, meaning any vegetable oil which has, by hydrogenation, been hardened for human consumption. But if any non-edible oil continues to be non-edible even on hydrogenation it would not fall under Tariff Item 13 merely because of hydrogenation. Therefore, the observation, that if the decision of the Supreme Court is to be applied to the Central Excises and Salt Act also Tariff Item 13 would be rendered nugatory, is not correct.

7. Regarding the other point of distinction mentioned by the Govt. of India it is contended for the appellants that VNE oils even when they are converted into hardened technical oils continue to be known in common trade parlance as VNE oils only. In support of this contention they have produced several certificates from Traders and Trade Organisations as Annexure 'C' to their reply dated 15-1-1983 to the show cause notice. These certificates are to be found in pages 41 to 45 of their paper book. The Supreme Court has held in the Dunlop India case (AIR 1977 S.C. 597) that in the interpretation of terms in fiscal statutes it is the common or trade parlance that should commend itself to the authorities, except when the terms are specifically defined in the Statute itself. To similar effect is the observation of the Supreme Court in the Inch International Industries case 1981 Vol. 47 STC 359.

It should be noted that in the present case no evidence has been produced for the department to rebut the statement in the certificates produced by the appellants. These certificates are to the effect that VNE oils "even after the hardening to form technical oils continue to be called 'VNE oils' only by the trade and are dealt with as such by the trade. It is, therefore, seen that the second reason given by the Govt. to exclude the applicability of Tariff Item 12 in considering the case of hardened technical oil, does not appear to be correct.

8. In the circumstances, it is the decisions in the Hindustan Lever case and Jayalakshmi Cotton & Oil Products Ltd. case (cited/supra) that appear correct since they follow the ratio of the Supreme Court judgment in the Tungabhadra Industries case.

9. No doubt, Shri Lakshmi Kumaran contends that when the commodity in question is referred to as hardened oil, the word 'oil' therein merely refers to the original source and not the nature of the commodity as VNE oil. It is in this connection that he had referred to steel and steel furniture and commented that just as steel and steel furniture would fall under different Tariff Items hardened rechemical oil would be different from oils. But the anology does not appear to be opposite in view of the conclusions of the Supreme Court in the Tungabhadra Industries case wherein, for various reasons given, it had been held that in spite of hydrogenation and chemical changes taking place the groundnut oil continued to be oil only, though in a semi-solid form.

10. Another contention of Shri Lakshmi Kumaran was that edible VNE oils falling under T.I. 12 would pass into T.I. 13 when hydrogenation takes place but that v/hen a further process of hardening also takes place the commodity would move out of T.I. 13 but not revert back to T.I. 12 and would have to be placed under T.I. 68. He said that in the same manner in respect of the three hardened oils in question also they will have to be classified under T.I. 68. But T.I. 12 covers VNE oils of all sorts. It is only such varieties thereof as would be edible even when hydrogenated that would fall under T.I. 13. This is not for the reason that they would on hydrogenation cease to be VNE oils, but because T.I.13 has been specifically provided for such hydrogenated vegetable oils as vegetable products. Therefore, even with reference to the edible variety if a further hardening takes place making it non-edible, it would not appear to be correct to contend that thereupon they would move to T.I. 68 and not revert back to T.I. 12. But, in any event, so far as the three hardened oils at issue in this appeal, they had always been non-edible and so would never have moved into T.I. 13. Therefore, as far as these three hardened oils are concerned, they will have to be classified under T.I. 12 only and not under T.I. 68, for the reasons earlier mentioned.

11. Shri Lakshmi Kumaran points out that in the proceedings before the lower authorities the appellants had been contending that the VNE oils in question do not undergo any chemical change when they are hardened.

That had also been put-forward as a reason why they should be construed to be VNE oils only even after hardening and should continue to be classified under T.I. 12. Shri Lakshmi Kumaran comments that this contention about absence of chemical change is not correct. He has referred to certain passages in Bayley's Industrial Oil and Fat Products in support of his contention about chemical changes taking place during hyrogenation and hardening. It has been seen that even in the Tungabhadra Industries case the Supreme Court itself has taken note of such irreversible chemical changes taking place during hydrogenation. Therefore, the contention of the appellants before the lower authorities about absence of chemical change may not be correct.

But, as held by the Supreme Court in the Tungabhadra Industries case, the oils continue to be oils in spite of such chemical changes. We have already seen that non-edible vegetable products cannot fall under T.I.13. merely because of hydro-genation. We had also seen that T.I. 12 comprises of VNE oils, all sorts. Therefore, in view of the conclusion that VNE oils continued to be oils in spite of hydrogenation or hardening, the mere fact that chemical changes take place during such processes would not take them outside T.I. 12.

12. Shri Jetley has referred to an order dated 28-8-1984 of the Assistant Collector of Central Excise, Kalyan (pages 21 to 23 of the paper book) in which he had held that hardened Rice Bran oil would be classifiable under T.I. 12 and not T.I. 68. No doubt, as Shri Lakshmi Kumaran points out the order of the Assistant Collector may not be even of persuasive value so far as this Tribunal is concerned, especially since the said order was subsequent to the two earlier orders of this Tribunal itself classifying hardened oils under T.I. 12. But Shri Jetley points out that the order of the Assistant Collector is not merely on the basis of this Tribunal's judgment but an independently reasoned order, though at the end reference is made to the order of the Tribunal also. But Shri Lakshmi Kumaran contends that the said order of the Assistant Collector should not be taken as an acceptance by the department of the conclusions of the Tribunal in the two orders under which they had classified hardened technical oils under T.I. 12 and no conclusion should be drawn in the present case on the basis of the order of the Assistant Collector. In so far as the order is that of the Assistant Collector we do not place any reliance on the reasonings in the said order for arriving at any conclusion in the present instance.

13. But on a careful consideration of the submissions of both sides we hold, for all the reasons mentioned earlier, that the three hardened,oils concerned in this case undoubtedly fall under T.I. 12 only and cannot be relegated to T.I. 68. We do not feel that there is any need to refer this matter to a Special Bench of more than three Members as suggested by Shri Lakshmi Kumaran.

14. We, therefore, hold that the orders of the lower authorities classifying the three hardened oils in question under T.I. 68 were not proper. This appeal is accordingly allowed, setting aside the orders of the lower authorities, directing classification under T.I. 12 with consequential relief, if any.

1. The learned counsel for the department said that in the judgment in Navasari Oil Product Limited v. Superintendent of Central Excise, Navasari (Special Civil Application No. 862 of 1978), the High Court decided that super hardened oil with melting point of 44C was liable to duty under item 68 of Central Excise Tariff. It has been argued, he said, that this decision was only a result of two items being presented as competitors before the High Court viz. item 13 and item 68 and that, therefore, in this limited field the High Court decided in favour of item 68 as the more appropriate item. The learned counsel for the department said that it is not correct to make such distinction because it must be assumed that when the High Court held item 68 to be correct, it must have considered all other items including item 12 and item 13 as inappropriate. He also said that the Supreme Court have ruled in 1972 TLR 1244, that judgments should not be distinguished because certain grounds had not been considered and the Court should be deemed to have taken all grounds into consideration. He, accordingly, said that he did not wish to distinguish the Tungabhadra judgments applicability. So saying he proceeded to distinguish it.

2. Mr. V. Laxmi Kumaran said that in the Tungabhadra Industries judgment, the Supreme Court had in its mind a certain type of hydrogenation. The hidrogenation before the Supreme Court was a hydrogenation after which the oil continued to be edible. There was no hardened oil " of the kind we have here before us which was no longer fit for human consumption. He also said that the judgment in the Tungabhadra case was one given under the Madras General Sales Tax Act, 1939. The judgment reproduced parts of rule 18 of the Madras General Sales Tax (Turnover and Assessment) Rules, 1939. The counsel read the parts of rule 18 which run as follows : "18(1) Any dealer who manufactures groundnut oil and cake from groundnut and/or kernel purchased by him may, on application to the assessing authority having jurisdiction over the area in which he carries on his business, be registered as a manufacturer of groundnut oil and cake.

(2) Every such registered manufacturer of groundnut oil will be entitled to a deduction under Clause (k) of Sub-rule (1) of rule 5 equal to the value of the groundnut and/or kernel, purchased by him and converted into oil and cake if he has paid the tax to the State or such purchases : Provided that the amount for which the oil is sold is included in his net turnover." 3. The counsel then read a few other paragraphs to show that this decision was not relevant for the purpose of the case we have before us since he said the Supreme Court was dealing only with a factory which produced vegetable product from groundnut oil. There is no case here of an oil hardened till it became unfit for human consumption, but only a decision whether the edible vegetable product was classifiable as an oil for the limited purposes of that Act. He argued that the latest order of the Tribunal (Order No. 366/84-C) did not take into account the decision of the Tribunal in M/s. Vegetable Oils Limited, Bombay, Order No. 183/1983-C in which the Tribunal decided that hardened technical oil was classifiable only under Tariff Item 68.

4. He said that the judgment of the Supreme Court in the Tungabhadra case did not consider the existence of oil hardened by hydrogenation to make it unfit for human consumption. The Supreme Court had only the edible hardened vegetable product as a competitor with the oil. The decision it had to make was whether, after it had been hydrogenated and hardened into a vanaspati, the groundnut oil should still be classed as a vegetable oil. The two oils, he said, were used for cooking. There is no difference in the use and popular understanding and hence the Supreme Court held that the hydrogenated oil continued to be groundnut notwithstanding the process.

5. The learned counsel said it was not correct to say that the hydrogenated oil does not undergo any chemical change. He referred to the fact that on hydrogenation, the iodine value of the oil changes drastically. He said that hydrogenation is a sophisticated process. He read from Volume 2 of the Bailey's Industrial Oil and Fat Products edited by Daniel Swern. The volume contains a chapter on hydrogenation.

He pointed out that the book deals in great detail with the chemistry of hydrogenation and it should be seen clearly that there has been a chemical change brought about by a chemical reaction. The iodine value itself changes after hydrogenation. The physical properties of the oil change after hydrogenation. The oil becomes hard from its previous liquid character. It is not possible to view the change as anything but a complete transformation from one product to another. This alone is enough to make the difference that takes the product out from item 12.

Since, super hardened oil cannot go into item 13, it must, necessarily, fall into item 68, the only other heading that can accommodate it. The learned counsel for the department said that there has been a chemical reaction in hydrogenation by the entry of the hydrogen into the molecule.

6. The chapter on hydrogenation and the chemistry of hydrogenation in Bailey's Industrial Oil and Fat Products speaks of changes that take place in the process. The book says, for example,' that hydrogenation takes place only when the three reactants have been brought together-the unsaturated oil, a liquid, the catalyst (which is a solid), and hydrogen gas. But there is nothing in the book that will support the argument that the chemical reaction is of such a nature that the oil is no longer an oil. Unsaturated oils are many kinds of oils that are hydrogenated, after which they become saturated. But this does not change, in any way, the "oil" character : they remain oils in their behaviour, structure and use. It would be easy to mistake the chemical reaction in hydrogenation as resulting in a different product.

It is not so. A chemical reaction that takes place here is only designed to achieve a certain physical characteristic, viz., to raise the melting point. Even though the oil after hydrogenation becomes relatively saturated, it remains an oil in all characteristics and there is nothing to distinguish the two except the saturation.

7. The iodine value that the learned counsel for the department thinks makes such a difference, in fact, does not have the role he thinks it plays. The iodine value of an oil only refers to the ability of an oil to absorb the element iodine. After hydrogenation an oil's ability to absorb iodine decreases; but this does not make any difference to its nature as an oil. Here it is useful to note that different liquid oils have vastly different iodine numbers or value (IV). For example, castor oil has an iodine value of 85. Peanut oil has an iodine value of 98 and sunflower oil has an iodine value of as high as 135. Coconut oil has an iodine value of only 10 and linseed oil has an iodine value of 177. All these are oils, behave like oils, are used like oils and exhibit all the properties of oils, and yet, their iodine values vary from 10 to 177. It makes no sense to say that a difference in iodine value makes the difference to the "oily" nature of the substance.

8. Bailey's Industrial Oil and Fat Products speaks of 'simultaneous isomerization, both positional and geometrical, of the unsaturated bonds. Also, vegetable oils are glycerides of fatty acids that contain one, two, three or more unsaturated bonds in each fatty acid. Since each double bond may be isomerized or hydrogenated at different rates depending on its position or environment in the molecule, the overall reaction is quite complex. Also, since oils are composed of triglyceride esters, the position of the fatty acid on the glycerol determines the physical properties of the molecule. Thus, the partial hydrogenation of soybean oil would result in the production of a minimum of 30 different fatty acids, the cis and trans forms of partially hydrogenated linolenic, linoleic, oleic acids, so there would be at least 4000 different trigly-cerides possible. This is an illustration of what hydrogenation is all about. It is not what the learned counsel for the department thinks it is. Whatever the chemical reaction that hydrogenation entails, it does not produce a product that is not an oil, from a product that was an oil. It does not change an oil into a non-oil.

"Fats and oils are water-insoluble, hydrophobic substances of vegetable, land animal, or marine animal origin which consist predominantly of glyceryl esters of fatty acids, so called triglycerides. Reversible changes in state owing to variation in temperature may obliterate the common conception that fats are solids and oils are liquids, so that today this distinction between the terms fat and oil is largely academic. The terms are still used commercially, but they have only limited significance." 10. Note the words "they say have only limited significance". It is a fact that the hardened oil can be liquified easily by application of heat, some more easily than others, but all of them can be rendered 'liquid'. All solid fats like ghee, vanaspati, margarine, butter, lard, are solid at ordinary temperature but are liquid in summer. If the department says that the physical quality of being a solid makes all the difference, then, it should be also logical and say that when vanaspati is liquid in summer it should be assessed under item 12 because it is not hard or hardened. It would be an anachronism to speak of a liquid solid, called vanaspati, in summer. Both the trade and the department accept vanaspati under item 13 in summer even though it is liquid then, at any rate, in most parts of India. There is a fallacy in thinking that the solid nature of vanaspati or the solid tallow makes a different substance from the oil from which it is made. It is not a different product but the very same product of the same oil with all the characteristics of an oil.

11. We have on the authority of Hawley's. The Condensed Chemical Dictionary that 'there is no chemical difference between the fat and oil, the only distinction being the fats are solid at room temperature and the oils are liquid'. In Bailey's Industrial Oil and Fat Products., Volume 2, we find this paragraph : "The characteristic of fats most directly affected by hydrogenation is the iodine number, which decreases in direct proportion to the amount of hydrogen absorbed. Characteristics that do not depend on unsaturation, such as saponification number, hydroxyl number, Reichert-Meissl number, and content of unsaponifiable matter, are substantially unchanged by hydrogenation." 12. We have seen that iodine number (iodine value) makes no difference to the "oily" nature of the oil, in the context we are considering this problem. The absorption of hydrogen by the oil or the reduction of the iodine value after its hydrogenation, in no way changes the characteristics and function of the oil. It may be more useful in a number of ways, such as, improving its keeping qualities and odour and flavour or raise its melting point and viscosity so that it becomes more readily utilisable in industrial uses, such as, soap making, grease making, etc. etc. But it remains oily, an oil, and not a different substance.

13. There are certain changes introduced into the oil by hydrogenation as when the hydrogenation content is increased thereby facilitating the making of soap. But there are other processes through which oils have to go to make them useful for some other purposes. Sunflower seed and corn oils need to be dewaxed before they can meet the criteria of a salad oil. This does not make a finished salad oil a product different from an oil. Various oils have different constituents. Some oils like sunflower seed oils contain high content of linoleic acid which is nutritionally important. I do not know if the learned counsel for the department will say that they are different from other oils and, therefore, would merit a different kind of classification from the other oil.

14. It has to be kept constantly in mind that the problem here is whether the hardened technical oil unfit for human consumption is an oil fit to be assessed under item 12 or has ceased to be an oil and has to migrate to item 68. Unconvincing reasons have been advanced by the department that the hardened technical oil is not an oil, having changed its character and, therefore, should be taken out of item 12 to item 68. We have seen the decision of the Tungabhadra case by the Supreme Court. The learned counsel for the department tried to distinguish it, even while he professed he did not wish to distinguish it, by saying that it was a decision only for the purpose of a sales tax Act and concerned two substances both of which were used for cooking. As there was no consideration of a super hardened technical oil, the Supreme Court did not have this substance in mind. In saying so he is doing exactly what he said should not be done when the Gujarat High Court's decision in the Navasari Products decision was distinguished by saying that the Court had only item 13 and item 68 before it. But in distinguishing the Tungabhadra case, the learned counsel for the department assumes that Supreme Court did not know that an oil can be hardened so much that it is no longer fit for human consumption. He said that the existence of item 12 should be assumed to be known to the Gujarat High Court in Navasari case while for his own argument, he assumes that the Supreme Court did not know that an oil can be hardened to 45C rendering it unfit for human consumption. I am not prepared to make that assumption. I am only prepared to say that in Tungabhadra case, the Supreme Court had two products before it, a liquid oil and a hydrogenated hardened oil. And the Court decided that the hardened oil was an oil of the same nature as the liquid oil from which it is made.

15. I would like to quote here a decision of the Supreme Court in Champaklal v. State of Gujarat [AIR 1980 Supreme Court 8089]. In this judgment the Supreme Court went very deep into the dispute of whether vanaspati could be considered to be an oil. The dispute was under the Minimum Wages Act, 1948. The Court was called upon to decide whether the employment in a vanaspati manufacturing concern was an employment in an oil mill. After considering many arguments advanced by the two sides, the Court went into the technology of hydrogenation before it arrived at its conclusion. I reproduce below paragraph 8 of this judgment : It is not disputed that the Company is not covered by any of the items enumerated in Part I of the Schedule to the Act, except item 5. The most important point to be determined in the case, therefore, is whether employment in a vanaspati manufacturing concern would fall-within the ambit of item 5 of Part I of the Schedule to the Act, i.e., whether it is an employment in an oil mill or not. The only argument advanced on behalf of the appellants in this connection is, as it was before the two courts below, that vanaspati is a form of ghee which is not an oil; and this contention we find to be without force. Vanaspati, in our opinion is essentially an oil although it is a different kind of oil than that oil (be it rape-seed oil, cotton-seed oil, ground-nut oil, soya-bean oil or any other oil) which forms its basic ingredient. Oil will remain oil if it retains its essential properties and merely because it has been subjected to certain processes would not convert it into a different substance. In other words, although certain additions have been made to and operations carried out on oil, it will still be classified as oil unless its essential characteristics have undergone a change so that it would be a misnomer to call it oil as understood in ordinary parlance. The word 'oil' is not defined in the Act and, therefore, its dictionary meaning may well be pressed into service for interpreting the term 'oil mill'. According to Webster's Third New International Dictionary (1966 Edition) the 'word 'oil' has different connotations in different situations but in the context of item 5 aforesaid the meaning to be given to it would be : "any of various substances that typically are unctuous, viscous, com-bustible liquids or solids easily liquefiable on warming and are not miscible with water but are soluble in either, naphtha, and often alcohol and other organic solvents, that leave a greasy not necessarily permanent stain (as on paper or cloth), that may be of animal, vegetable, mineral, or synthetic origin, and that are used according to their types chiefly as lubricants, fuels and illuminants, as food, in soap and candles, and in perfumes and flavouring material." All the ingredients of this meaning are fully satisfied in the case of hydrogenated vegetable oil. We may specially point out that even solids easily liqucfiable on warming fall within the meaning given by Webster.

Now the various processes, namely, neutralization, bleaching, Meodorisation, hardening and hydrogenation to which oil is subjected for being converted into vanaspati leave its basic characteristics untouched i.e. it remains a cooking medium with vegetable fat as its main ingredient. Neutralisation, bleaching and deodorisation are merely refining processes so that the colour, the odour and foreign substances are removed from it before it is hydrogenated and hardened and even the two processes last mentioned allow the oil to retain these characteristics. Even ghee, for that matter, is nothing but a form of oil although it is obtained from animal fat, being a derivative from milk. It may be of use to mention that in Persian language ghee is known as 'raughan zard', i.e. yellow oil, and it does not need an expert to point out that the viscosity of ghee depends upon the weather because with the rising temperature during summer months it turns into a liquid while the cold of December and January solidifies it.

Nonetheless it remains an oil and it makes no difference that is called ghee in ordinary parlance. The word is merely different name for an oil which is not derived from vegetables. From that point of view the term 'vegetable ghee' is a contradiction in terms, ghee being essentially an animal fat. The reason why it has come to be called vegetable ghee appears to be that in its finished form it resumbles ghee in appearance and viscosity and is also considered a more respectable form of cooking medium when so-called, thus, catering to the psychological satisfaction of the consumer.

We pointedly asked learned counsel for the appellants if he could indicate any difference between vegetable oil and vanaspati which would essentially distinguish the former from the latter, either in physical or chemical properties or in food value. No such difference was indicated and all that he said was that vanaspati would normally be available in solid state and had the appearance of ghee rather than of any oil. This, in our view, is a superficial difference which does not at all go to the root of the matter. Accordingly, we hold that vanaspati must be regarded as an oil for the purpose of the aforesaid item 5 in spite of all the processes to which the oil foring its base has been subjected in order to convert it into the finished product.' 16. In this paragraph the Court said that the oil would remain oil if it retained its essential properties : merely because it had been subjected to certain processes would not convert it into a different substance. In other words, although certain additions have been made to and operations carried out on the oil, it would still be classified as oil unless its essential characteristics have undergone a change so that it would be a misnomer to call it oil as understood in ordinary parlance. The word 'oil' was not defined in the Act and, therefore, its dictionary meaning might well be pressed into service. After considering the dictionary meaning in Webster's Third New International Dictionary the Court reproduced the definition as we have seen above.

The meaning of the word connotes that the substance is unctuous, viscous and many other things. There is nothing about oil being a liquid or a solid. And everybody knows that the viscosity of ghee varies with the weather because of the rise in the temperature in summer and its fall in December and January.

17. It would be tempting to distinguish this judgment on the ground that it was given in a dispute that arose about whether a man could said to be employed in an oil mill when he works in a vanaspati factory and, therefore, would not have application to a taxation dispute like the one we have here under the Central Excise Act. I think that, that would be a narrow and uninformed opinion. The paragraph reproduced above can easily apply to a dispute under Central Excise Act. After an oil hardened by hydrogenation is the subject of dispute before us.

Whether the hydrogenation results in a product fit for human consumption or no longer fit, will make no difference. It the vanaspati can be an oil, it is not because it is edible but because, truly speaking, it is an oil, and this is what the Supreme Court said. There is no difference in oil hardened to 37 or 38C and an oil hardened to 44C except that the latter has a higher melting point and this makes it unsuitable for human consumption. It is not that the higher melting point imparts something to the oil that makes it inedible in the same way that castor oil, for example, is inedible. Castor oil is inedible even after hydrogenation.

18. The learned counsel for the department argued that nobody speaks of steel furniture as being the same class or category as the steel from which it is made. There is total misconception in this argument. The steel furniture does not have the utility of the steel. The steel can be put to a large number of uses whereas the furniture can be used only as furniture and nothing else. The analogy is totally inapt. The steel is only the raw material from which the steel furniture is made. The liquid oil, however, though it is the material from which the hardened oil is made, shares with the finished product the same utility, character, nature and uses. The one can be used for the other. The hydrogenation cannot impart to the oil a quality it does not have and even after hydrogenation the oil remains a viscous, unctuous, water-immiscible substance that it was before.

19. The learned counsel for the department said that no one talks of a steel furniture being in the same category as steel from which it is made. The comparison is wide of the mark. Steel furniture cannot be classed with steel because, for one thing, it has a separate heading for itself in the Central Excise Tariff. For another, the item for steel is not an "all sorts" heading like item 12. And the uses to which steel furniture is put are not the uses to which steel is put, unless it is reduced to scrap. Oils and facts are put to the same uses. The comparison forgets that we have a problem about a product that, according to the department, should be assessed under item 68. But even the department has never suggested placing steel furniture under item 20. I want to emphasize that this dispute is limited in scope. It is whether hardened technical oil can be assessed under item 12 or item 68. The question we have to ask ourselves is whether item 68 is more suitable for the hardened technical oil than item 12. Item 12 covers : "Vegetable non-essential oils-all sorts, in or in relation to the manufacture of which any process is ordinarily carried on with the aid of power." 21. The department says that this is unsuitable for hardened technical oil and that item 68 is more suitable. This item covers : 22. These are the choices before us. Though the department says that hardened technical oil, because of the hydrogenation, has become 'all other goods not elsewhere specified', my opinion is that it has not become 'all other goods not elsewhere specified' but that it remains a 'vegetable non-essential oil' in spite of its hydrogenation. I think it is more scientific and more reasonable and more suitable, knowing the nature of the product, to say that the hardened technical oil is a vegetable non-essential oil. It would be a different thing if the tariff carried a heading which is more specific for hardened technical oil than item 12 and item 68 ; for example, an item that says "hardened technical oil not elsewhere specified," after item 13. In this way, the oil hardened beyond human consumption and unfit for item 13, will have to be assessed under that item. Unfortunately, there is no such item.

There is only item 68. No one can seriously suggest with logic that item 68 is more specific than item 12. It would tax one's understanding too much, to do so, when item 12 is available. When the hardened technical oil has so much in common, almost everything in common, with the non-hardened oil, there should be little doubt in anybody's mind that in these circumstances, item 12 is the only item capable of covering these oils.

23. What the counsel and the department do not comprehend is that fats, except those that qualify for item 13, have no specific heading.

Because of certain chemical processes made on the oil to harden it, they say there has been a chemical reaction-that this must transfer the oil out of item 12. The chemical changes that may have taken place and which the counsel asserts must disqualify the fat from item 12, do not transform the oil. The oil remains oil in all its characteristics. The saturation, the iodine value, even the physical (solid) phase acquired do not set the fat apart from its origin, the oil. Liquid unhydrogenated oils can and do possess these same characteristics.

Coconut oil has an iodine value as low as 10, is solid at below 25C.But it is always known scientifically, technologically as well as popularly as an oil, even when it is in the solid state.

24. If the chemical reaction makes the difference the department's counsel thinks it does, let us take the neutralization of a vegetable non-essential oil. An aqueous solution of an alkali is added. The alkali combines with the free fatty acids to form a soap which settles out of the solution at the bottom. This reaction removes the fatty acid and is, therefore, without doubt a chemical reaction. The remnant oil is chemically and structurally different from the raw unneutralized oil. Would the learned counsel for the department say this takes the oil out of item 12 If chemical reaction is what makes so much change to an oil, the neutralization is one such reaction, a reaction which, in material respects, is even more real and substantial than hydrogenation. But neutralized (refined) oil is held by the department to fall in item 12, just like the unneutralized oil. The logic of the department's case is difficult to comprehend.

25. The department advocates assessment of hardened technical oil under item 68. This item is only for goods not specified anywhere else. The department thinks that "all other goods not specified elsewhere" is more specific than "vegetable non-essential oils, all sorts." It ignores the basic rule of assessment that the more specific item should be preferred to one less so. It does not take much to see whether "goods not specified elsewhere" is more specific than "vegetable non-essential oils" for a product that has an oily nature, is produced from an oil, has the uses of an oil, and indeed looks like an oil, and is quite commonly accepted and spoken of as an oil, and is so related to oil, that it has little or no chemical difference from it. If hydro-genated oil can harden, so can many oils if subjected to heat loss (in winter or by chilling). If the department can see the virtue of specificity for hardened technical oil in item 68, I cannot. I see item 12 as more specific than item 68 for all hardened technical oil not fit for human consumption.

26. The two Supreme Court rulings, Tungabhadra and Champaklal were, no doubt, about vanaspati and oil. It would be easy to argue that the Court would not have said what it did about inedible hardened tallow and oil. This is to miss the true essence and content of the judgments.

While it may be true that the hardened product in both cases was edible vanaspati, the dispute centered only on whether the hardened oil could be put in the same class as the unhardened oil. The Court went into many details, and even into the technology of hardening. It did not escape the Court's notice that the hardened oil was nothing but the oil from which it was produced, and that scientifically it was an oil with all the attributes of oil. [Our dispute does not have edibility as an element; only the hardening. The oil itself may be inedible, because hydrogenation is carried out on all kinds of all for industrial purposes. Any hydrogenation does not make inedible oil edible]. The Supreme Court saw the clear similarity between the two substances. It was not impressed by the argument about the difference, viz., that vanaspati would be available in the solid state and had the appearance of ghee. This, the Court thought, did not go to the root of the matter.

It ruled that the solid fat was the same as the liquid oil and that the two should be categorised together. The Court saw no difficulty in calling a hardened ghee an oil, and this, let it be remembered, when the dispute was whether or not the vegetable product should be classed as an oil, and not as in our case, whether the hardened oil should be assessed under item 12 or under item 68.

27. The true understanding of the two judgments, in my opinion, can produce only one conclusion, and that is, that the hardened technical oil is the same thing as the oil from which it is made. It is clearly akin to the oil, a homologue, a product of scientific modification but unaltered in its essential character. These judgments apply totally and unequivocally to the case before us. And in view of this verdict, no reference to a larger bench can be made or ought to be made. All decisions to the contrary must yield to these judgments of the Court.

28. I, accordingly, allow the appeal and set aside the orders of the Collector (Appeals). The hardened oil shall be assessed under item 12 and consequential relief, if any, shall be given without delay.


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