Judgment

RANGANATHAN, J :- These are appeals under Section 35L of the Central Excises and Salt Act, 1944 (hereinafter referred to as the Act). The appellant, Tata Oil Mills Company Limited, is engaged in the manufacture of various varieties of soaps. The present dispute has arisen in relation to its factory at Ghaziabad in the State of Uttar Pradesh.

2. The dispute pertains to the eligibility of the appellant to the concession granted by the Central Government under Rule 8(1) of the Central Excise Rules, 1944 through notification No. 46 of 1972, subsequently amended by notifications Nos. 153 of 1973 dated 24-7-73, and 25 of 1975 dated 1-3-75. Even though there are three notifications,, the point is common and both the appeals involve the same question.

3. The question arises this way. Ad valorem excise duty at 20% is levied on soap which falls under item 15 of the first schedule to the Act. Notification No. 46 of 1972 exempts "such soap as is made from indigenous rice bran oil or from a mixture of such oil with any other oils from so much of the duty of excise leviable thereon as is equivalent to the amount of duty calculated at the rate of one rupee and fifty paise per metric tonne of such soap for each additional percentage point increase in the use of such rice bran oil which is in excess of fifteen per cent of the total oils used in the manufacture of such soap." To put it in simpler words, the notification intends to grant a concession where the percentage of the rice bran oil used in the manufacture of soap exceeds fifteen per cent of the total oil consumption in the manufacture. The extent of exemption is graded according to the percentage of rice bran oil in, excess of fifteen per cent. For example, if the rice bran oil is twenty per cent of the total oils used in the manufacture, the duty exemption will be Rs. 7.50 per metric tonne of soap manufactured. The 1973 notification is on the same lines with the only difference that the duty exemption per metric tonne is Rs. 7.50 instead of Rs. 1.50. The notification of 1975 raised the percentage of rice bran oil referred to in the 1972 notification from fifteen percent to twenty five per cent but reduced the duty rebate from Rs. 7.50 to Rs. 3.50 per metric tonne. Another notification No. 118/75 has been referred to in the papers before us but it has no relevance to the question that falls to be decided here and is left out of account.

4. The difficulty in the interpretation has arisen because the process of manufacture of soap in the assessees factory at Ghaziabad did not involve the use of rice bran oil as such. This factory manufactured soap from rice bran fatty acid. The rice bran fatty acid was extracted from rice bran oil in the assessees factory elsewhere. Incidentally, it may be mentioned that the other factory is also licensed under the Excise Act for the manufacture of rice bran fatty acid. The excise authorities rejected the appellants plea for exemption under the. first three notifications on the ground that rice bran fatty acid and rice bran oil are technically and commercially two separate commodities. It was pointed out that the concession under the notifications is available only where soap is made from indigenous rice bran oil and other oils. This meant that rice bran oil must form part of the process of manufacture of soap in the factory which is manufacturing the soap and claiming the exemption. The notification will not apply merely because the soap is manufactured out of rice bran fatty acid which in turn has been obtained by hydrolysis of rice bran oil in a different factory (may be one belonging to the same assessee which is a separate unit of manufacture for purposes, of excise duty).

5. The Tribunal confirmed this view. It considered the terms of notification No. 25/ 75 and held:

"We observe that the concession given under notification No. 25/ 75 is apparently with a view to encourage the use of rice bran oil in the soap industry. The point for consideratio