1979 (7) TMI 104 - HC - Central Excise

Summary

Issues Involved:
1. Liability of petitioners to pay excise duty on vegetable non-essential oil.
2. Interpretation of the term "finished excisable goods".
3. Applicability of the exemption notifications dated March 1, 1963, and January 14, 1956.
4. Validity of the show cause notices issued by the Department.

Issue-wise Detailed Analysis:

1. Liability of Petitioners to Pay Excise Duty on Vegetable Non-essential Oil:
The petitioners, a company engaged in processing and manufacturing vegetable oils, received several show cause notices from the Superintendent of Central Excise for the clearance of vegetable tallow from October 9, 1971, to May 1974. The Department claimed that the petitioners were not entitled to the exemption under the notification dated March 1, 1963, and were liable to pay excise duty on vegetable non-essential oil. The petitioners argued that they were not liable to pay excise duty as the vegetable tallow is not a finished excisable good and thus falls within the exemption provided by the notification.

2. Interpretation of the Term "Finished Excisable Goods":
The core issue was whether vegetable tallow is considered a "finished excisable good". The petitioners contended that vegetable tallow is not a finished product but an intermediate material used for manufacturing soaps and other articles. The Department argued that vegetable tallow, once identifiable, is a finished excisable good regardless of its subsequent use. The judgment concluded that an item becomes a finished excisable good when it acquires a distinguishable identity. Therefore, vegetable tallow, identifiable post-hydrogenation, is a finished excisable good, even if used further for manufacturing other products.

3. Applicability of the Exemption Notifications Dated March 1, 1963, and January 14, 1956:
The notification dated March 1, 1963, exempted vegetable non-essential oils from excise duty under certain conditions. The second proviso to this notification stated that the exemption does not apply if the vegetable non-essential oil is used in manufacturing finished excisable goods that are exempt from the whole duty or chargeable to nil duty. The petitioners argued that the vegetable tallow, being used for soap manufacture, should still be exempt. The judgment found that since the vegetable tallow was exempt from excise duty under the notification dated January 14, 1956, the second proviso of the March 1, 1963, notification applied, making the petitioners liable for excise duty on the vegetable non-essential oil used in its production.

4. Validity of the Show Cause Notices Issued by the Department:
The show cause notices issued by the Department were deemed valid. The judgment concluded that the petitioners, having benefited from the exemption under the January 14, 1956, notification, could not claim further exemption under the March 1, 1963, notification. The alternative contention raised by the petitioners was neither argued before the authorities below nor raised in the petition, and thus could not be entertained at the argument stage.

Conclusion:
The petitioners were found liable to pay excise duty on vegetable non-essential oil used in manufacturing vegetable tallow. The vegetable tallow was classified as a finished excisable good, and the exemptions claimed under the notifications were not applicable. The show cause notices issued by the Department were upheld, and the petition was dismissed with costs. The Department was instructed not to enforce the bank guarantee for a period of four weeks.