2009 (5) TMI 630 - SC - Indian Laws

Oil cake - Mustard oil cake whether finished goods or by-product - Manufacture - Oil cake - Finished goods - Evidence - Subsidy - Transport subsidy

Summary

Issues Involved:
1. Eligibility of oil cake as "finished goods" under the Transport Subsidy Scheme.
2. Interpretation of the term "finished goods" within the context of the scheme.
3. The role of the State and Central Government in determining the eligibility for transport subsidy.
4. The High Court's requirement for additional evidence to classify oil cake as "finished goods."

Issue-wise Detailed Analysis:

1. Eligibility of oil cake as "finished goods" under the Transport Subsidy Scheme:
The appellant claimed transport subsidy for oil cake, asserting it as a finished product under the Transport Subsidy Scheme. The scheme, formulated by the Government of India on 23-7-1971, aimed to promote industrial growth in selected remote areas by subsidizing the transport of raw materials and finished goods. The appellant's industrial unit in Assam produced mustard oil and oil cake, both verified under the scheme. Despite the State Government's recommendation, the Central Government clarified in 1997 that oil cake, being a by-product, was not eligible for subsidy. The High Court upheld this view, leading to the appellant's challenge.

2. Interpretation of the term "finished goods" within the context of the scheme:
The Supreme Court emphasized that the term "finished goods" should not be limited to the main product but include any marketable product resulting from the manufacturing process. The scheme defined "finished goods" as products produced according to the approved manufacturing program. The Court noted that the scheme's objective was to make industries in remote areas economically viable by subsidizing transportation costs, thus promoting trade and commerce.

3. The role of the State and Central Government in determining the eligibility for transport subsidy:
The State Government and the State Level Committee consistently treated oil cake as finished goods eligible for transport subsidy. Certificates from the District Industries Centre confirmed that oil cake was produced in accordance with the approved manufacturing program. The Central Government's 1997 clarification contradicted its previous stance and the consistent practice of granting subsidies for oil cake. The Supreme Court highlighted that the scheme's purpose was to support industrial units in remote areas, making the exclusion of oil cake counterproductive.

4. The High Court's requirement for additional evidence to classify oil cake as "finished goods":
The High Court denied the appellant's claim, stating the lack of evidence on the manufacturing process, composition, and marketability of oil cake. The Supreme Court disagreed, stating that oil cake's production and marketability were well-known facts in trade and industrial circles. The Court cited reference works and technical journals to establish that oil cake is a distinct, marketable product with various uses, including cattle feed and fertilizer.

Conclusion:
The Supreme Court concluded that the process of extracting mustard oil and oil cake from mustard seeds constituted manufacturing, producing distinct and marketable products. The Court declared oil cake as "finished goods" under the Transport Subsidy Scheme, eligible for transport subsidy until its exclusion in 1997. The appeal was allowed, and the High Court's orders were set aside. The respondents were directed to verify and release the due subsidy amount for oil cake exported out of the State within six months.