H.R. Syiem, Member (T)

1. This appeal dated 28-2-75 was filed by M/s. Hindustan Lever, Bombay, against Order-in-Appeal No. 202/CO/1974 dated 12-7-1974 passed by the Appellate Collector of Central Excise, Calcutta. This order of the Appellate Collector came about as a result of an Order No. 93(O) of 1972 dated 25-10-72 passed by the Assistant Collector of Central Excise, Calcutta-III, Division 4, Brabourne Road, Calcutta. In this order, the Assistant Collector came to a finding that the processed V.N.E. oil used in the manufacture of soap (through the intermediate stage of hardened V.P.) not in the same factory but in another factory, was not entitled to get exemption of duty as it was used in the manufacture of extra hard V.P. which was cleared free of duty from Hindustan Lever's factory at Shamnagar to another factory at Garden Reach for use in the manufacture of soap by following the procedure set out in Chapter X of the Central Excise Rules, 1944 in terms of Notification No. C.E.R. 8(3) 56-C.E. dated 14-1-56. Reconsidered that Notification No. 181/71-C.E. dated 9-10-71 provided that no exemption should be allowed in respect of V.N.E. oil used in the manufacture of finished excisable goods if the finished excisable goods produced by the manufacturer were exempted from the whole of the excise duty leviable thereon or were chargeable to nil rate of duty. Notification No. 181 was itself a notification that amended an earlier Notification No. 33/63, dated 1-3-63. He accordingly ordered that Hindustan Lever should pay duty on the processed vegetable non-essential oils used in the manufacture of the extra hard V.P. (which was subsequently used in the manufacture of soap, not within the same factory but at Garden Reach factory of M/s. Hindustan Lever).

2. The dispute arose from the fact that Hindustan Lever used vegetable non-essential oil to manufacture what the Assistant Collector of Central Excise calls extra hard vegetable product. The extra hard vegetable product is cleared without payment of duty for the manufacture of soap in another factory belonging to Hindustan Lever after observing the" procedure set out in Chapter X of Central Excise Rules, 1944. In terms of Government of India Notification No. 33/63, vegetable no-essential oils, "whether processed or not, used in the manufacture of goods falling under item Nos. 13, 14 and 15" of the Central Excise Tariff Schedule, were exempted from the whole of the duty of excise leviable thereon. The notification also explains that for this purpose, processed V.N.E. oil means a vegetable non-essential oil which has undergone, subsequent to its extraction, any one or more of the following processes, viz., centrifuging, treatment with an alkali or acid, bleaching, deodorization. This notification was amended on 16-7-65 by Notification No. 110/65 which substituted the following words for the words reproduced already earlier :

"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-

(i) goods falling under item Nos. 13, 14 and 15 of the said Schedule; 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 said Rules is followed."

3. Up to the issue of the last notification, there was no dispute. It was only when notification 181 dated 9-10-71 was issued that the trouble began for the Hindustan Levers. This notification added a proviso to Notification No. 33/63-C.E. which ran thus :

"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 thereon or are chargea