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Kusum Products Ltd. Vs. Collector of Central Excise - Court Judgment

LegalCrystal Citation
CourtCustoms Excise and Service Tax Appellate Tribunal CESTAT Delhi
Decided On
Judge
Reported in(1985)LC673Tri(Delhi)
AppellantKusum Products Ltd.
RespondentCollector of Central Excise
Excerpt:
.....council nomenclature (cccn) does not cover within its purview the by-products of refining of oils. acid oils from refining fall in heading 15.10 ("fatty acids; acid oils from refining ; fatty alcohols"). these acid oils have relatively high free acid content and are prepared by decomposing with mineral acid the soap stock obtained during refining of crude oils.14. it must be noted, however, that chapter 15 of the cccn is wide in its scope covering animal and vegetable fats and oils and their cleavage products, prepared edible fats, and animal and vegetable waxes. the central excise tariff item no. 12 cet with which we are presently concerned, covers "vegetable non-essential oils, all sorts" we have, therefore, to see whether acid oils are known and recognised as vne oils. the.....
Judgment:
1. This appeal dated 17.12.1981 was filed by M/s. Kusum Products against the order of the Central Board of Excise & Customs No. 547-B of 1981, dated nil. The dispute arose from an adjudication of the Collector of Central Excise and Customs, West Bengal, Calcutta No.I/Goods N.E.S./1981 dated 30.5.1981.

2. By this order of 30.5.1981, the Collector held that acid oil was a new product, different from the Vegetable Non-Essential Oils the original raw material, and was classifiable under item 68 of the CET.3. The learned Counsel for the appellants, M/s. Kusum Products disputed this claim. He said that acid oil was a VNE oil, and cannot be assessed under item 68. The treatment with sulphuric acid does not produce a new product the oil which is classed acid oil was already in the oil which was treated to obtain the soap stock from which the acid oil is prepared.

4. The learned Counsel for the department refuted this argument by pointing to the adjudication of the Collector, who said that the acid oil was a new and different product and one which can fall only under item 68. Because of its high acid content it cannot qualify as a VNE oil to be assessed under item 12. It was also sold as an acid oil and this was its commercial name. The acid oil and VNE oil are two separate products. There is no case for saying acid oil is a VNE oil. The action was correct.

5. This is what the Collector said in his order to arrive at the conclusion that acid oil was not a VNE oil, but was a product assessable under item 68.

VNE oil (Tri-glyceride of fatty acids) is the combination of fatty acid and glycerine and also contains free fatty acid and impurities like colours and gummy matters. When neutralisation is done by the addition of caustic soda the free fatty acid contained in the VNE oil is removed and it becomes what is known as soap stock. This soap-stock contains small amount of neutral oil absorbed in it. This soap-stock is used for making soap. Due to storage and transport difficulty and also limitation of the use of soap-stock in making quality soap, this soap-stock is converted into acid oil by the addition of sulphuric acid. This soap-stock is thus decomposed into what is known as acid oil. After the addition of sulphuric acid the resultant product is acid oil and the water (in which sodium sulphate is mixed) is let out. This acid oil, contains free fatty acids and some neutral oil. Such acid oil contains 50 to 80% of free fatty acids, according to the success of the separation of neutral oil (page 200 of 'oils, Fats and Fatty Foods', 4th Edition by K.A. William). In the present case the sample shows that the free fatty acid present was 49.1% It is clear that this acid oil which is free fatty acid of some other reacted oil is a recovered product and not a VNE oil. It is also found from Brussels Nomenclature that acid oil (prepared by decomposing with mineral acid the soap stock obtained during refining of some oil has been placed in Heading 15.10 whereas VNE oil has been placed in Heading 15.07. This also clearly shows that the acid oil and the VNE oil are clearly two separate products.

Acid oil is a recovered product and is not VNE oil. This acid oil is sold quite often to other soap manufacturers. In this particular case, M/s. Kusum Products Ltd. have sold this product to other soap manufacturers namely, Asiatic Soap Co., Laxmikant Kashiram, etc. It is, therefore a remarkable commodity. Even in technical books there is reference to the fact that the acid oil which is a recovered oil, is sold with the commercial name as acid oil. It is, therefore, a commercial product. There is no doubt that a new product has come into being. I accordingly hold that acid oil is classifiable under item 68 of Central Excise Tariff and that the assessment of acid oil under item 68 is fully justified and there is no reason to classify it under item 12 i.e. VNE oil.

6. It is not, however, correct to say that because the free fatty acid content was 49.1%, the acid oil was not a VNE oil. A high free fatty acid content cannot take an oil out of the category of a VNE oil. VNE oils have different fatty acid content. It is not any single constituent that determines whether a substance is a non-essential oil or not, but its characteristics, nature, properties etc. As a matter of fact "non-essential oil" is not a widely used term but is accepted for purposes only of distinguishing it from an essential oil. These two oils have properties which sharply divide them into two separately recognised substances. Simply stated, an essential oil is generally an odoriferous distillable oil of plant origin, the principal constituents of which are terpenes, benzenoid and aliphatic compounds; they are also known as ethereal oil. Oils that are not essential oils are not volatile and cannot be distilled readily unless decomposed. They leave a permanent greasy stain on paper. They are readily hydrolised and oxidised when exposed to air. They are either liquid or solid.

7. It is claimed by the department that the acid oil was sold as acid oil and not as VNE oil. No VNE oil is sold as VNE oil. In fact there is no such thing in commerce. Oils are sold as groundnut oil, coconut oil, castor oil, linseed oil etc.

8. The Board says that the BTN classifies acid oil under a head (15.10) different from the one from VNE oil (15.07). First of all, the BTN does not recognise any such thing as VNE oil. But what the Board did not see was that both 15.07 and 15.10 are under the same Chapter 15 : Animal and Vegetable Fats and Oils.., a far cry from items 12 and 68 of the CET.9. There is nothing we can see in favour of saying that acid oil is not a VNE oil. The very fact, as we can see from the proceedings, that it was used in the manufacture of soap confirms, if confirmation was needed, that it was a VNE oil. The fact that it had a large free fatty acid content would fit it admirably for soap manufacture. We are not able to understand why. the department says it is not a VNE oil. The process of preparing it detailed in the Collector's order does not in any way prove it is not a VNE oil. It is a VNE oil and has all the characteristics and properties a VNE oil should have. It is put to the same use. There is, therefore, everything for say it is a VNE oil and nothing for saying it is a good not elsewhere specified.gn 10. We set aside the order of the Board as it proceeds on the premise that the acid oil is assessable under item 68 of the CET. We hold it is assessable under item 12 of the CET.11 Other arguments were produced on behalf of M/s. Kusum Products Ltd., but in view of our conclusion above, we need not go into them now.Sd/- S.C. Jain Sd/- G. Sankaran Sd/- H.R. SyiemMember Member Member 12. I have perused the order written by Shri Syiem. I would like to add a few lines.

13. Heading No. 15.07 ("Fixed vegetable oils, fluid or solid, crude, refined or purified") of the Customs Co-operation Council Nomenclature (CCCN) does not cover within its purview the by-products of refining of oils. Acid oils from refining fall in heading 15.10 ("Fatty acids; acid oils from refining ; fatty alcohols"). These acid oils have relatively high free acid content and are prepared by decomposing with mineral acid the soap stock obtained during refining of crude oils.

14. It must be noted, however, that Chapter 15 of the CCCN is wide in its scope covering animal and vegetable fats and oils and their cleavage products, prepared edible fats, and animal and vegetable waxes. The Central Excise Tariff item No. 12 CET with which we are presently concerned, covers "vegetable non-essential oils, all sorts" We have, therefore, to see whether acid oils are known and recognised as VNE oils. The classification under the CCCN would not, in my view, provide a reliable answer to this question since, CCCN is a far more comprehensive tariff unlike the Central Excise Tariff.

15. The standard book of reference "Bailey's Industrial Oil and Fat Products" edited by Daniel Swern, (Volume 1, 4th Edition) has a Chapter (No. 6) titled "Composition and characteristics of Individual Fats and Oils". In that Chapter, different types of acid oils are discussed. For example, under the heading "Laurie Acid Oils" are listed Coconut Oil, Palm Kernel Oil ; under the heading "Erucic Acid Oils" are listed Rapeseed Oil, Crambe oil ; under the heading "Linolenic Acid Oils are listed Linseed Oil, Soyabean Oil, Wheat Germ Oil.

16. It is, therefore, clear that acid oils are recognised as oils. A.s stated elsewhere in this order, the expression "vegetable non-essential oils'' is not a commercial nomenclature but it only indicates that the oil is of vegetable origin and that it is not an essential oil. An essential oil is a non-fatty oil with a strong, usually pleasant odour and taste obtained from flowers and other parts of plants by solvent extraction or steam distillation. Terpenes are the chief components of many essential oils, others are mixtures of aldehydes, acids, alcohols and the like. Essential oils are subject to evaporation in contrast to fixed vegetable oils, which are not (-see "Glossary of Chemical Terms" by Clifford A. Hampel and Gessner G. Hawley). On the other hand, vegetable oils (or vegetable non-essential oils) are oils extracted from the seeds, fruits or nuts of plants and generally considered to be mixtures of mixed glycerides, (-see "Condensed Chemical Dictionary" by Gessner G. Hawley).

17. Thus, acid oils are recognised in literature as oils. If these are of vegetable origin, they would be classifiable as vegetable oils. Item No. 12, CET covers, as we have noted, all sorts of vegetable non-essential oils. There is nothing in the wording of the item to even remotely suggest that the scope of the item is confined to oils which are the immediate result of extraction from vegetable material. It could cover even oils which may be the result of refining or cleavage of such oils so long as they are recognised as oils. And we have seen that the authoritative book "Bailey's Industrial Oil and Fat Products" recognises acid oils as oils. Item 12, in the circumstances, would be far more appropriate than the non-descript residuary item 68.


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