1989 (3) TMI 132 - SC - Central Excise

Whether the CEGAT was in error in holding that the hydrogenated rice bran oil was a process of manufacture which brought into existence a new product, i.e., hydrogenated rice bran oil? Held that - The Tribunal particularly emphasised that the hardened technical oil is the same thing as the oil from which it is made. It is clearly akin to the oil in homologue, a product of scientific modification but unaltered in its essential character. Therefore, in our opinion, the Tribunal was right in the conclusion it arrived at. Appeal dismissed.

Issues Involved:
1. Classification of hydrogenated rice bran oil under the Central Excise Tariff.
2. Whether hydrogenation constitutes a manufacturing process that creates a new product.
3. Applicability of Tariff Item 12 versus Tariff Item 68 CET.
4. Interpretation of "vegetable non-essential oils" and "vegetable products" under the CET.
5. Legal precedents and principles relevant to the classification of hydrogenated oils.

Detailed Analysis:

1. Classification of Hydrogenated Rice Bran Oil under the Central Excise Tariff:
The primary issue was whether hydrogenated rice bran oil should be classified under Tariff Item 12 or Tariff Item 68 of the Central Excise Tariff (CET). The Assistant Collector initially classified it under Item 68, considering it a new product with distinct characteristics. However, the Appellate Collector and subsequently the CEGAT classified it under Item 12, treating it as a vegetable non-essential oil despite its hardened state.

2. Whether Hydrogenation Constitutes a Manufacturing Process that Creates a New Product:
The Court examined whether the hydrogenation process, which transforms rice bran oil into a semi-solid state with a higher melting point, constitutes a manufacturing process that results in a new product. The Court noted, "Indubitably hydrogenation of rice bran oil is a process. But all processes need not be manufacture." The process must change the identity, use, and purpose of the goods to be considered manufacturing. The Court concluded that hydrogenated rice bran oil, despite being hardened, did not lose its essential characteristics as oil.

3. Applicability of Tariff Item 12 versus Tariff Item 68 CET:
The Court analyzed the applicability of Tariff Item 12, which covers "vegetable non-essential oils, all sorts," and Tariff Item 68, a residuary item for goods not specified elsewhere. The Court observed that "a more specific item should be preferred to one less so," and since Item 12 specifically covers vegetable oils, including hardened forms, it was more appropriate than the residuary Item 68. The Court stated, "Item 12 is more specific than Item 68, for all hardened technical oil not fit for human consumption and such would cover under this category."

4. Interpretation of "Vegetable Non-Essential Oils" and "Vegetable Products" under the CET:
The Court referred to the definitions in the CET, where Item 12 covers "vegetable non-essential oils, all sorts," and Item 13 covers "vegetable products" hardened for human consumption. The Court emphasized that the hydrogenated rice bran oil, being unfit for human consumption, did not fall under Item 13 but remained under Item 12. The Court cited the case of Tungabhadra Industrial Ltd., which held that hydrogenated oil retains its essential nature as oil, supporting the classification under Item 12.

5. Legal Precedents and Principles Relevant to the Classification of Hydrogenated Oils:
The Court relied on several precedents, including Tungabhadra Industrial Ltd. v. The Commercial Tax Officer, which held that hydrogenated oil remains oil despite the process it undergoes. The Court also referred to Champaklal v. State of Gujarat, which stated that oil retains its essential properties even after processing. These precedents reinforced the view that hydrogenated rice bran oil should be classified under Item 12.

Conclusion:
The Supreme Court upheld the CEGAT's decision, affirming that hydrogenated rice bran oil falls under Tariff Item 12 CET as "vegetable non-essential oils, all sorts," and not under the residuary Item 68. The Court concluded that the process of hydrogenation did not transform the oil into a new product but merely altered its physical state. The Tribunal's decision was found to be correct, considering all relevant factors and legal principles. Both appeals were dismissed without any order as to costs.

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