2004 (11) TMI 109 - SC - Central Excise

Whether processing of the edible vegetable oil, purchased by the Appellants, results in manufacture? Held that - In this case, neither in the Section Note nor in the Chapter Note nor in the Tariff Item do we find any indication that the process indicated is to amount to manufacture. To start with the product was edible vegetable oil. Even after the refining, it remains edible vegetable oil. As actual manufacture has not taken place, the deeming provision cannot, be brought into play in the absence of it being specifically stated that the process amounts to manufacture. In any event, for the period prior to 1986 i.e. before the definition of the term Manufacture was amended, this process could not be taken to amount to manufacture. Thus for the period prior to 1986 the demand could not have been sustained in any event. In this view of the matter, we are unable to sustain the Orders of the authorities below. It is accordingly held that there is no manufacture and the refined oil is not excisable. The Orders of the authorities below holding that there is manufacture and refined oil is excisable are hereby set aside. The demand notices issued are quashed. Appeal allowed.

Issues Involved:
1. Whether the processing of edible vegetable oil results in manufacture.
2. Classification of the refined oil under the Central Excise Tariff.
3. Applicability of excise duty on the refined oil.
4. Interpretation of the term "manufacture" under the Central Excises and Salt Act, 1944 and its amendment in 1986.

Issue-Wise Detailed Analysis:

1. Whether the processing of edible vegetable oil results in manufacture:
The core issue was whether the refining process undertaken by the appellants constituted "manufacture." The appellants argued that their process did not result in a new product but merely refined the existing edible vegetable oil. The Supreme Court referred to the definition of "manufacture" under Section 2(f) of the Central Excises and Salt Act, 1944, both pre- and post-1986 amendment. The pre-1986 definition did not include refining edible oil as a manufacturing process, whereas the post-1986 definition expanded the scope to include processes specified in the Section or Chapter notes of the Tariff Schedule as amounting to manufacture. The Court concluded that neither the Section Note, Chapter Note, nor the Tariff Item specified that the refining process amounted to manufacture. Therefore, the refined oil remained the same product, and no new commodity was created.

2. Classification of the refined oil under the Central Excise Tariff:
The refined oil was classified under Tariff Item 1503.10, which covers fixed vegetable oils that have undergone processes such as treatment with an alkali or acid, bleaching, and deodorization. The appellants did not dispute that their refining process fell under these categories. However, the classification alone did not determine whether the process amounted to manufacture. The Court emphasized that for a process to be deemed manufacture, it must be explicitly stated in the Section Note, Chapter Note, or Tariff Item, which was not the case here.

3. Applicability of excise duty on the refined oil:
Given the Court's finding that the refining process did not constitute manufacture, the refined oil was not subject to excise duty. The Court referenced several precedents, including the cases of M/s. Tungabhadra Industries Ltd. v. The Commercial Tax Officer, Kurnool, Commissioner of C. Ex., Chandigarh-I v. Markfed Vanaspati & Allied Indus., and Collector of Central Excise v. Technoweld Industries, to support the principle that mere processing does not necessarily result in a new and distinct product subject to excise duty.

4. Interpretation of the term "manufacture" under the Central Excises and Salt Act, 1944 and its amendment in 1986:
The Court analyzed the definition of "manufacture" before and after the 1986 amendment. The pre-1986 definition did not consider refining edible oil as manufacture. The amended definition included processes specified in the Section or Chapter notes of the Tariff Schedule as amounting to manufacture. The Court clarified that merely listing a process in the Tariff Entry without specifying it as manufacture was insufficient. The process must be explicitly declared as manufacture for it to be deemed excisable. This interpretation was crucial in determining that the refined oil was not a new product and thus not subject to excise duty.

Conclusion:
The Supreme Court held that the refining process did not constitute manufacture, and the refined oil was not excisable. The Orders of the authorities below were set aside, and the demand notices were quashed. The appeals were allowed with no order as to costs.

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