1978 (11) TMI 74 - HC - Central Excise

Vegetable oil - Place of removal - Connotation of - Dutiability - Component parts - Dutiability - Admissibility - Review of one s own order - Competency

Summary

Issues Involved:
1. Liability of the Union of India to refund excise duty collected on vegetable non-essential oil.
2. Proper construction of Rules 9 and 49 of the Central Excise Rules, 1944.
3. Whether the manufacturing process of hydrogenated vegetable oil is a continuous uninterrupted process.
4. Competence of the Central Government to review its earlier order.
5. Entitlement of the petitioner to a refund of excise duty for a specific period.
6. Claim for interest on the refunded amount.

Issue-wise Detailed Analysis:

1. Liability of the Union of India to refund excise duty collected on vegetable non-essential oil:
The petitioner, a manufacturer of hydrogenated vegetable oil (vanaspati), claimed that the excise duty collected on the intermediate product (vegetable oil) was not payable since it was part of a continuous manufacturing process. The Union of India initially agreed to refund the duty but later reversed this decision, leading to a legal challenge.

2. Proper construction of Rules 9 and 49 of the Central Excise Rules, 1944:
The Court examined Rules 9 and 49 to determine if excise duty was payable on the intermediate product. Rule 9 prohibits the removal of excisable goods from the place of manufacture without payment of duty. Rule 49 states that duty is chargeable only when goods are removed from the factory premises. The Court concluded that in a continuous, uninterrupted manufacturing process within a composite plant, the transfer of intermediate products does not constitute "removal" under Rule 9.

3. Whether the manufacturing process of hydrogenated vegetable oil is a continuous uninterrupted process:
The petitioner asserted, and the Court accepted, that the manufacturing process was a continuous, uninterrupted one within a composite plant. This was supported by admissions from the Union of India in previous affidavits and the lack of effective contradiction from the respondents.

4. Competence of the Central Government to review its earlier order:
The Delhi High Court had previously quashed the Central Government's review of its order to refund the excise duty, deeming the review ultra vires and without authority. This reinstated the original order directing the refund.

5. Entitlement of the petitioner to a refund of excise duty for a specific period:
The Court held that the petitioner was entitled to a refund of the excise duty collected from 11th July 1961 to 28th February 1963. The duty was collected on an intermediate product in a continuous manufacturing process, which was not liable for excise duty under the proper construction of Rules 9 and 49.

6. Claim for interest on the refunded amount:
The petitioner sought interest on the amount withheld. The Court acknowledged the wrongful withholding but declined to award interest, noting that the issue was complex and not free from difficulty. The Court emphasized that the Union of India did not act with mala fide intent.

Conclusion:
The petition was allowed, and the petitioner was entitled to a mandamus directing the respondent to dispose of the refund applications and pay the amounts due. The Court did not grant interest on the refunded amount but awarded costs to the petitioner.