Bombay High Court
Indian Vegetable Products Limited vs Union Of India And Others on 1 January, 1800
Equivalent citations: 1980(6)ELT704(BOM)
JUDGMENT Pendse, J.
1. The petitioners are a company carrying on the business, inter alia of processing and manufacturing vegetable oils. The petitioners have a factory at Reay Road, Bombay, and the petitioners at the said factory process vegetable oils. The vegetable oils which undergo processes are known as "Processed Vegetable Non-essential Oils". The said vegetable non-essential oils undergo process of hydrogenation and thereafter two products come into existence, one is Vanaspati while the other is known as vegetable tallow or hardened technical oils. Vegetable tallow with a melting point below 41oC can be used for Bakery production or in the making of margarine, while vegetable tallows with a melting point higher than 41oC are used for diverse industrial purposes. The vegetable tallow goes within the expression "vegetable product" and the excise duty leviable on such vegetable products is prescribed by item 13 of the Central Excise Act. The vegetable non-essential oils attract the excise duty under tariff item No. 12. From the vegetable products it is possible to manufacture various kinds of soaps, fatty acids, greases, lubricants or can be used as protective agent in the manufacture of plate. The soaps which are manufactured from vegetable non-essential oil fall within tariff entry No. 15 for the levy of excise duty.
2. The production and sale of vegetable oils and vegetable products has been regulated by the Governments of India by an order known as Vegetable Oil Products Control Order, 1947. Under the provisions of this order the Controller has regulated the manufacture and sale of vegetable tallows. The petitioners from time to time applied to the Controller and sought permission to manufacture vegetable tallow and under the orders the petitioners are required to supply the production to the party named in the permit issued by the Controller.
3. The Government of India issued notification dated January 14, 1956, whereby the vegetable products are exempted from the payment of excise duty leviable thereon provided thee Collector of Central Excise is satisfied that the vegetable product is intended for use-(a) in the manufacture of soaps including insoluble soaps; of greases, lubricants and textile sizing agents and (d) as a protective agent in the manufacture of tin plate. The notification annexed at Exhibit 'C' to the petition and it provides that in case where an exemption is sought under this notification the procedure set out Chapter X of the Central Excise Rules, 1944, should be followed. It must be stated at this juncture that it is not in dispute between the parties and in fact the parties have proceeded on the basis that the vegetable tallow forms part of vegetable products. The petitioners have manufactured vegetable tallows from vegetable non-essential oil and have supplied such vegetable tallow on the manufacture of soaps from time to time. In this petition the petitioners have claimed certain reliefs in respect of clearances of vegetable tallow from October 9, 1971 onwards till May 1974. The petitioners have supplied vegetable tallow to the manufacture of soaps without payment of excise duty.
4. The petitioners received several show cause notices from the Superintendent of Central Excise for the clearance of vegetable from October 9, 1971 to May 1974, calling upon the petitioners to shows cause why excise duty should not be recovered from the petitioners in respect of vegetable nonessential oils. At this stage it is stage it is necessary to mention that Government of India, Ministry of Finance, has issued a notification bearing No. 33/63 dated 1st March 1963, and by this notification the vegetable non-essential oil were exempted form the payment of the whole the excise duty leviable there on certain conditions. This notification was amended from time to time and the notification in existence on the relevant date reads as under :-
(6) Under Government of India,Ministry of Finance (Department of Revenue), Notification No. 33/63-Central Excise dated the 1st March, 1963 as subsequently amended by Notifications No. 50/63- Central Excises, dated the 7th March 1963; No. 14/64-Central Excises, dated the 15th February 1964; No. 110/65- Central Excises, dated the 16th JUly, 1965 and NO. 181/71 - Central Excises, dated the 9th October, 1971, the following vegetable non-essential oil, falling under this item are exempt from the payment of the whole of the excise duty leviable there on:
(a) all sorts of vegetable non-essential oils, other than processed vegetable non-essential oils.-
(b) Vegetable non-essential oil, whether produced in the factory of production of the excisable goods specified below or elsewhere, if used after it is processed in the manufacture of-
(i) goods falling under Item Nos. 13,14 and 15 of the First Schedule to the Central Excises and Salt Act, 1944; and
(ii) artificial or synthetic resins falling under Item No. 15A of the said Schedule :
Provided that, in respect of the vegetable non-essential oil produced elsewhere than in the factory of production of the said excisable goods, the procedure set out in rule 56A of the Central Excise Rules, 1944, is followed:
Provided further that no such exemption shall be allowed in respect of vegetable non-essential oils used in the manufacture of finished excisable goods if such finished excisable goods produced by the manufacturer are exempted from the whole of the duty of excise leviable there on or are chargeable to nil rate of duty.
Provided further that no such exemption shall be allowed in respect of vegetable non-essential oils used in the manufacture of finished excisable goods if such finished excisable goods produced by the manufacturer are exempted from the whole of the duty of excise leviable there on or are chargeable to nil rate of duty.
Provided further that no such exemption shall be allowed in respect of vegetable non-essential oils used in the manufacture of finished excisable goods if such finished excisable goods produced by the manufacturer are exempted from the whole of the duty of excise leviable there on are chargeable to nil rate of duty.
Explanation - For the purpose of this notification processed vegetable non-essential oil means a vegetable non-essential oil which has under gone subsequent to its extraction any one or more of the following processes, namely: -
(i) Treatment with an alkali or acid; (ii) Bleaching; (iii) Deodorization."
5. It is claim of the department that the petitioners are not entitled to the advantage of this notifications and are liable to pay excise duty on vegetable non-essential oil. The petitioners replied to the show cause notice by pointing out that the petitioners are not liable to pay excise duty as the second proviso to notification dated March 1, 1963, makes duty provided the vegetable non-essential oil is used in the manufacture of finished excisable goods and according to the petitioners the vegetable tallow is not a finished excisable goods. The answer given to the show cause notice by the petitioners was not accepted and the show cause notices were confirmed. The petitioners carried appeal before the Appellate Collector or Central Excise, Bombay but the same also ended in dismissal. The petitioners, there after have filed the present proceedings under article. 226 of the Constitution to challenge the validity and legality of the orders passed by the excise Authorities.
6. Mr. Desai, the learned counsel appearing on behalf of the petitioners, contended that the petitioners are not liable to pay excise duty on vegetable non-essential oil as the notification dated March 1, 1963, clearly applies to them. Mr. Desai submitted that in the present proceedings it is not in dispute that the vegetable tallow manufactured by the petitions by process of by hydrogenation falls with in the tariff item No. 13 and it is also not in dispute that the entire quantity of vegetable tallow manufactured by the petitioners during the relevant years was supplied to the manufactures of soaps. The learned counsel submitted that the assumption of the authorities below that every excisable goods is a finished excisable goods is a finished excisable goods is wholly incorrect and on the plain reading of the two notifications annexed at Exhibits B and C it must be held that the petitioners are not liable to pay excise duty on vegetable non-essential oil.
7. Mr. Dalal, the learned counsel appearing on behalf of the respondent on the other hand contended that the second proviso of to notification (Exhibit 'B') clearly takes out the claim of exemption made by the petitioners The learned counsel further submitted that the vegetable tallow is finished excisable goods and the contrary contention of the petitioners is totally unjust In view of these rival contentions the questions which falls for determination is whether the vegetable tallow is a finished excisable goods and even if it is so whether the petitioners can be deprived of exemption under the notifications Exhibit 'B' dated 1st March 1963. Mr. Desai submitted that the vegetable tallow is manufactured by process of hydrogentation form vegetable non-essential oil and the vegetable tallow is not end product in itself but can be used for manufacture of soaps or other articles. The learned counsel submitted that the vegetable tallow not being a finished excisable goods, the second s proviso to notification Exhibit 'B' is not at all attracted.
8. The petitioners had claimed both in the petitioners and before the authorities below that the vegetable tallow is not a product which can be used in itself and the department has not very seriously disputed that position . The department proceeded on the basis that every excisable goods is finished excisable goods, and Mr. Desai has very seriously disputed that claim. It is not possible to equate every excisable goods with finished excisable goods.
It is necessary to find out the exact connotation of the word `finished. In my judgment a finished article comes into existence when it acquires distinguishable identity. By process of hydrogentation item of vegetable tallow comes into existence and it can be identified as vegetable tallow thereafter. Now once an item comes into existence with the define identity one can very easily say that the process of manufactures is complete Mr. Dalal submits that the manufacture of vegetable tallow is finished or complete soon as an identifiable item comes into existence and whether such goods are used as end product in itself or not is wholly irrelevant. There is force in this submissions of MR. Dalal Merely because, a manufactured goods is used subsequently for manufacturing another article, it can not be concluded that the earlier manufactured goods are not finished or it may be that the vegetable tallow is used further for manufacture of soaps or as stated by the department for Glycerine monosteriate, softer Calcium steriate Sodium but that would not make vegetable manufactured goods. In my judgment, it must be held that the vegetable follow manufacture by process of hydrogentation form vegetable non-essential oil is a finished excisable goods. Mr.Desai in this connection has contended that in the notification, Exhibit 'B' at one stage the words used are "excisable goods" while at point the words used are 'finished excisable goods' and that indicates that the word "finished" was used in contra-distinction with intermediate materials. The submission proceeds on the basis that the vegetable tallow is merely an intermediate material to use such equently for manufacture of end product. The submission is not correct because the words "finished excisable goods" are not used in contradistinction with the words "excisable goods". The words "excisable goods" used in sub-para (b) of the notifications refers to only the place of manufacture while the second proviso where the words "finished excisable goods" occur. the expression is used to withdraw the exemption granted by the notification. The second proviso carves out certain cases from exemption given by the notification . Mr. Desai submits that such carving out of exemption from the general provision must be strictly construed and the proper meaning should be given to the term 'finished excisable goods'. It cannot be overlooked that one is not construing the provisions of a Statute but the wording of a notification and reasonable meaning should be given to find out the exact meaning of it. In this connection Mr. Dalal rightly submitted that the proviso refers to the procedure to be followed under rule 56A in respect of vegetable non-essential oil produced elsewhere than in the factory and that the rule 56A(2) contains the identical provision as the second proviso in the notification Exhibit B.Mr. Dalal submits that readings of rule 56 A clearly indicates that the notifications never intended to make any distinction between the finished excisable goods and intermediate materials. Mr. Dalal submits that rule makes it very clear that vegetable tallow is finished excisable goods. It was also contended on behalf of the department that the vegetable tallow is marketable and sold in the market as finished goods therefore, it must be treated as finished excisable goods. In my judgment taking on overall view of the matter the vegetable tallow must be held to be a finished excisable goods although I do not agree with the finding of the below that every excisable goods is a finished goods.
Mr. Desai then submitted that even assuming that vegetable tallow is finished excisable goods still the petitioners are entitled exemption granted under the notification Exhibit 'B' The learned counsel submitted that the notification provides that vegetable non-essential oil falling under item No. 13, is wholly exempted from the levy of excise duty. This submission is correct and is not disputed on behalf of the department. What is urged on behalf of the department is that this exemption was taken out in view of second proviso of the notification. The second proviso to this notification takes out exemption if vegetable non- essential oil is used in the manufacture of finished excisable goods and if such finished excisable goods are (1) exempted from whole of the duty of excise leviable there on (2) are chargeable to nil rate of duty. On behalf of the department it is contended that second proviso in the notification applies to facts of the present case and petitioners are liable to pay excise to pay excise duty on vegetable non-essential oil. It is contended that in view of the earlier notification dated 14th January 1956.the entire manufacture of vegetable tallow was exempted from payment of excise duty as the same were intended to be used for manufacture of soaps. Mr. Desai did not dispute that the entire production of vegetable tallow was used for manufacture of soap and no excise duty was paid. But what was urged by the learned counsel is that proviso would come into play provided the exemption is attached to the entire tariff of vegetable products. It is not possible to accepted the submission of Mr. Desai that Tariff item 13, provides for duty on vegetable products and it is open to the Government to exempt a category of such vegetable products by notification. In the present case the notification dated January 14, 1956 (Exhibit`C') exempts the vegetable tallow from payment of excise duty provided it is used for the manufacture of soap. It is not disputed by the petitioners that vegetables tallow can be used for several other purpose. Mr. Desai submits that as vegetable tallow in not exempted totally but only if it used for manufacture of soaps the advantage of notifications Exhibit 'C' should be available to the petitioners. It is not possible to accede to this submission. The second provision to notification Exhibit 'B' specifically takes out cases where finished excisable goods is exempted from the whole of the duty leviable there on and it is not in dispute that no excised duty is leviable or payable in respect of the production of the petitioners for the relevant periods. If the petitioners have enjoyed benefit of notification Exhibit 'C' and have claimed exemption from the whole of duty leviable on vegetable tallow which was a finished excisable goods then it is file to contend that the advantage of notification exhibit 'B' is still available and no duty can be levied on vegetable non- essential oil . In fact Mr. Dalal rightly submitted that the this alternative contention raised by Mr. Desai was neither argued before the authorities below nor a contention has been raised any where in the present petition and the petitioners should not be permitted to advance contentions only at the stage of arguments. I have considered the submissions of Mr. Desai on merits and I found it unsustainable In these circumstances, the show cause notice issued by the department were perfectly valid and the orders passed by the authorities below do not require any interference in this petition under article 226 of the Constitution. The petition fails and the rule is discharged with costs.
9. The petitioners had furnished bank guarantee as per interim orders passed by this Court. The department would not recover the amount by enforcing the guarantee for a period of four weeks from to-day.