1980 (11) TMI 46 - HC - Central Excise

Summary

Issues Involved:
1. Classification of vegetable tallow under Item No. 13 of the Central Excise Tariff.
2. Applicability of Notification No. 33/63 as amended by Notification No. 181/71.
3. Estoppel regarding the classification of goods.
4. Entitlement to exemption under Notification No. 33/63.
5. Procedural fairness in changing grounds for liability.

Issue-Wise Detailed Analysis:

1. Classification of Vegetable Tallow under Item No. 13 of the Central Excise Tariff:
The petitioners initially classified the vegetable tallow under Item No. 13 of the Central Excise Tariff, which pertains to goods fit for human consumption. However, they later contended that the tallow was not fit for human consumption, as its melting point was 43^0C, whereas for human consumption, it should be between 33^0C to 37^0C. The court found that since the tallow was not fit for human consumption, it could not be classified under Item No. 13, even if it was an intermediate or finished product.

2. Applicability of Notification No. 33/63 as Amended by Notification No. 181/71:
The petitioners argued that the vegetable tallow was exempt from duty under Notification No. 33/63, which was amended by Notification No. 181/71. The second proviso of the amended notification stated, "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 chargeable to nil rate of duty." The court held that since the tallow was not fit for human consumption and did not fall under Item No. 13, the second proviso did not apply, and thus, no duty could be levied under this proviso.

3. Estoppel Regarding the Classification of Goods:
The respondents contended that the petitioners were estopped from changing their stance on the classification of tallow under Item No. 13, as they had initially claimed exemption on that basis. The court rejected this argument, stating that in taxation matters, there can be no estoppel. Hence, the petitioners were not precluded from contending that the tallow did not fall under Item No. 13.

4. Entitlement to Exemption under Notification No. 33/63:
The court examined whether the petitioners were entitled to an exemption under Notification No. 33/63. The notification provided an exemption for vegetable non-essential oils used in the manufacture of goods falling under Items 13, 14, and 15, provided certain conditions were met. The court held that since the tallow was used for soap (Item 15) and was not fit for human consumption, the petitioners were entitled to the exemption.

5. Procedural Fairness in Changing Grounds for Liability:
The respondents, at various stages, introduced new grounds for claiming duty, including the argument that the petitioners did not convert the oil into soap in the same factory. The court found that the respondents had not provided the petitioners an opportunity to meet these new grounds, which was procedurally unfair. The court emphasized that the Department could not change its grounds from stage to stage without giving the assessee an opportunity to respond.

Conclusion:
The court concluded that the petitioners were entitled to relief as the tallow did not fall under Item No. 13 and the second proviso of Notification No. 33/63 did not apply. The rule was made absolute, granting the petitioners relief in terms of prayers (a) and (b) of the petition. The court also noted that it would be open to the Department to take any other lawful action.