1984 (2) TMI 321 - AT - Central Excise

Summary

Issues Involved:
1. Entitlement to duty exemption for processed V.N.E. oil used in soap manufacture.
2. Interpretation and applicability of Notification No. 181/71-C.E.
3. Classification of hardened vegetable oil under Central Excise Tariff.
4. Compliance with Rule 56A of the Central Excise Rules, 1944.

Issue-wise Detailed Analysis:

1. Entitlement to Duty Exemption for Processed V.N.E. Oil Used in Soap Manufacture:
The appeal was filed by M/s. Hindustan Lever against the order of the Appellate Collector of Central Excise, which upheld the Assistant Collector's decision that processed V.N.E. oil used in the manufacture of extra hard V.P. (vegetable product) and subsequently in soap, was not entitled to duty exemption. The Assistant Collector's order was based on the interpretation that the processed V.N.E. oil used in another factory did not qualify for exemption under Notification No. 181/71-C.E. because the finished excisable goods (extra hard V.P.) were cleared free of duty.

2. Interpretation and Applicability of Notification No. 181/71-C.E.:
Notification No. 181/71-C.E., dated 9-10-1971, added a proviso to Notification No. 33/63-C.E., stating that no exemption shall be allowed for V.N.E. oil used in the manufacture of finished excisable goods if such goods are exempted from duty or chargeable to nil rate of duty. The Central Excise authorities considered the hardened vegetable product removed to the Garden Reach factory as finished excisable goods, and since these goods were not subjected to excise duty, the exemption was deemed forbidden.

3. Classification of Hardened Vegetable Oil under Central Excise Tariff:
The appellant argued that the hardened oil, with a melting point above 45^0C, did not fall under Item 13 of the Central Excise Tariff, which covers vegetable products fit for human consumption. Instead, it should be classified under Item 12 as vegetable non-essential oil, which includes "all sorts" of such oil, whether hardened or not. The Tribunal agreed, stating that unless the hardened oil is fit for human consumption, it would not be classified under Item 13 but remain under Item 12.

4. Compliance with Rule 56A of the Central Excise Rules, 1944:
The Department argued that the appellant did not obtain permission under Rule 56A, which requires following a specific procedure for moving vegetable non-essential oil to another factory for manufacturing specified excisable goods. However, the Tribunal noted that the goods moved under Chapter X procedure and that the hardened oil was used in soap manufacture. The Assistant Collector's demand for duty was based on Notification 181/71-C.E., not on the failure to observe Rule 56A.

Conclusion:
The Tribunal concluded that the hardened vegetable oil remained classified under Item 12 as vegetable non-essential oil and was exempt from duty under Notification No. 33/63-C.E. The exemption was still available even after 9-10-1971, as the soap produced was dutiable and cleared on payment of duty. The appeal was allowed, and the Tribunal found that the action taken by the original authorities was based on the misinterpretation of Notification 181/71-C.E. and not on the failure to comply with Rule 56A.