IMPORTANT POINT
Processing of the edible vegetable oil into refined oil does not result in manufacture of any new and distinct commodity.

Headnote:Central Excise and Salt Act, 1944 -Section 2(f) as amended w.e.f. 28.2.1986-Tariff Item 15.03-Refining edible vegetable oil-Whether by undergoing such a process there is manufacture-(No)-Definition of manufacture in Section 2(f) did not include process of refining edible oil-By refining edible oil there was not manufacture of any new and distinct commodity-Merely because some process has been carried on it is not necessary that a new commodity has come into existence-Orders of authorities below holding that there is manufacture and refined oil is excisable are hereby set aside-Demand notices issued are quashed.
       Held : The question for consideration is whether processing of the edible vegetable oil, purchased by the Appellants, results in manufacture. It is not denied that the refined oil, which is derived after the process, is a marketable commodity. As set out hereinabove, all the authorities below have held that there is manufacture and that the refined edible oil falls under Tariff Item 1503.10. (Paras 9 and 10)
       Thus, it is to be seen that Tariff Item 15.03 is in respect of "Fixed vegetable oils other than those under the heading No 15.02". Tariff Item 15.03 is sub-divided into two categories. Tariff Item 1503.10 covers fixed vegetable oils, which have undergone, subsequent to the extraction, any one or more of the following processes, namely, (1) Treatment with an alkali or acid; (2) Bleaching; and (3) Deodorisation. All other fixed vegetable oils fall under Tariff Item 1503.90. It is fairly not disputed that the Appellants undertake process mentioned in Tariff Item 1503.10. The question still remains whether by undergoing such a process there is manufacture. (Para 12)
       The amended definition enlarges the scope of manufacture by roping in processes which may or may not strictly amount to manufacture provided those processes are specified in the Section or Chapter notes of the Tariff Schedule as amounting to manufacture. It is clear that the Legislature realised that it was not possible to put in an exhaustive list of various processes but that some methodology was required for declaring that a particular process amounted to manufacture. The language of the amended Section 2(f) indicates that what is required is not just specification of the goods but a specification of the process and a declaration that the same amounts to manufacture. Of course, the specification must be in relation to any goods. (Para 16)
       We are in agreement with the submission that under the amended definition, which is an inclusive definition, it is not necessary that only in the Section or Chapter Note it must be specified that a particular process amounts to manufacture. It may be open to so specify even in the Tariff Item. However, either in the Section or Chapter Note or in the Tariff Entry it must be specified that the process amounts to manufacture. Merely setting out a process in the Tariff Entry would not be sufficient. If the process is indicated in the Tariff Entry, without specifying that the same amounts to manufacture, then the indication of the process is merely for the purposes of identifying the product and the rate which is applicable to that product. In other words, for a deeming provision to come into play it must be specifically stated that a particular process amounts to manufacture. In the absence of it being so specified the commodity would not become excisable merely because a separate Tariff Item exists in respect of that commodity. In this case, neither in the Section Note nor in the Chapter Note nor in the Tariff Item do we find any indication that the process indicated is to amount to manufacture. To start with the product was edible vegetable oil. Even after the refining, it remains edible vegetable oil. As actual manufacture has not taken place, the deeming provision cannot be brought into play in the absence of it being specifically stated that the process amounts to manufacture. In any event, for the period prior to 1986 i.e. before the definition of the term "Manufacture" was amended, this process could not be taken to amount to manufacture. Thus for the period prior to 1986 the demand could not have been sustained in any event. In this view of the matter, we are unable to sustain the Orders of the authorities below. It is accordingly held that there is no manufacture and the refined oil is not excisable. The Orders of the authorities below holding that there is manufacture and refined oil is excisable are hereby set aside. The demand notices issued are quashed. (Paras 23 to 26)

JUDGMENT

S.N. Variava, J.-These Appeals are against the Judgment dated 16th November, 1998 of the Customs Excise and Gold (Control) Appellate Tribunal [CEGAT].

2. Briefly stated the facts are as follows:

The Appellants purchase edible vegetable oil from the open market. On the oil purchased by them excise duty has been paid by the manufacturer. The Appellants subject this oil to certain processes for the purposes of refining the oil. After refining the oil, the Appellants sell the refined edible oil in the market. The Appellants filed, on 1st September, 1984, a classification list in respect of the refined oil sought to be cleared from the factory. It was mentioned therein that since no manufacturing activity was involved, no duty was payable on their clearances. On 17th September, 1984, the Superintendent of Central Excise returned the Classification List and called upon the Appellants to clear the goods on payment of excise duty at the rate of Rs. 100/- per metric ton and special excise duty at 5% of the basic excise duty. The Appellants filed Civil Writ Petition No. 3215 of 1984 in the Rajasthan High Court contending that since there was no manufacture, excise duty was not payable. On 23rd October, 1984, the Rajasthan High Court passed an interim order permitting the Appellants to clear the refined oil from its factory subject to the Appellants furnishing a solvent security at the rate of Rs. 105 per metric ton. This interim order was confirmed on 5th February, 1987.

3. Pursuant to the interim order, for the period prior to March 1986, the Appellants cleared their goods on furnishing security. For the period after March 1986, the Appellants were issued show-cause notices. The Appellants filed reply to the show-cause notices. By an Order dated 1st January, 1988 the Assistant Collector held that the refined oil cleared by the Appellants was classifiable under Tariff Item 1503.10 and duty of Rs. 40,47,586.25 was payable by the Appellants. The Appellants filed an Appeal against the Order of the Assistant Collector.

4. On 25th January, 1991, Writ Petition No. 3215/84 was finally disposed of by the Rajasthan High Court. A direction was issued to the Assistant Collector to decide the issue of classification of the said oils. Pursuant to the directions of the High Court, the Assistant Collector gave a personal hearing to the Appellants and then passed Orders dated 18/19th February, 1991 holding that a new and distinct product had been manufactured. It was held that that the said product was classifiable under sub-heading 1503.10 and duty was payable on the same. Against this Order also, an Appeal was filed by the Appellants on 2nd March, 1991.

5. The Appeal filed by the Appellants against the Order dated 1st January, 1988 was dismissed by the Collector (Appeals) on 30th July, 1991. The Appellants then filed a further Appeal to CEGAT against the Order dated 30th July, 1991.

6. On 22nd January, 1992, the Collector (Appeals) dismissed the Appeal filed against the Order dated 18/19th February, 1991. Against this Order, the Appellants filed Appeals before CEGAT.

7. The Appeal against Order dated 30th July, 1991, was taken up for hearing by CEGAT. A difference of opinion arose between the Judicial Member and the Technical Member. Therefore, the matter was referred to a Third Member of the Tribunal. The Third Member of the Tribunal agreed with the Technical Member and held that there was manufacture and the Appellants goods were classifiable under Tariff Item 1503.10. It is held that duty is leviable on the same. Against this Order, the present Civil Appeals have been filed.

8. On 26th February, 1999 the CEGAT also disposed of the Appeal filed by the Appellants against the Order dated 22nd January, 1992. Against the Order Civil Appeal No. 3923 of 1999 has been filed.

9. The question for consideration is whether processing of the edible vegetable oil, purchased by the Appellants, results in manufacture. It is not denied that the refined oil, which i

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2004 Supreme(SC) 1462

IMPORTANT POINTProcessing of the edible vegetable oil into refined oil does not result in manufacture of any new and distinct commodity.

Cases Referred (4)

IMPORTANT POINT
Processing of the edible vegetable oil into refined oil does not result in manufacture of any new and distinct commodity.