1998 (4) TMI 150 - AT - Central Excise

Summary

Issues Involved
1. Classification of "Acid Oil" under the erstwhile Central Excise Tariff: Tariff Item 12 or Tariff Item 68.
2. Applicability of Notification No. 115/75 for exemption benefit.
3. Binding nature of the Supreme Court's decision in Kusum Products Ltd. on the Tribunal.

Detailed Analysis

1. Classification of "Acid Oil" under the erstwhile Central Excise Tariff: Tariff Item 12 or Tariff Item 68

The primary issue in these appeals was whether "Acid Oil" should be classified under Tariff Item 12 as Vegetable Non-Essential Oil (VNE oil) or under the residual Tariff Item 68. The Tribunal's earlier decision in Kusum Products Ltd. classified Acid Oil under Tariff Item 12, but this was contested.

The Tribunal examined the chemical composition and production process of Acid Oil. Acid Oil is produced by treating soap stock (a by-product of refining VNE oil with caustic soda) with sulfuric acid. The resulting product contains a high percentage of free fatty acids and some neutral oil.

The Tribunal noted that the CCCN and HSN classified Acid Oils under separate headings from VNE oils, indicating they are distinct products. Acid Oils were classified under Heading 15.10 in CCCN and Heading 15.19 in HSN, while VNE oils were classified under Heading 15.07.

The Tribunal also considered technical literature which described Acid Oil as "acidulated soap stock" with a high free fatty acid content, distinguishing it from VNE oils, which are primarily triglycerides of fatty acids.

Based on these findings, the Tribunal concluded that Acid Oil is not a VNE oil and should be classified under the residual Tariff Item 68.

2. Applicability of Notification No. 115/75 for exemption benefit

Notification No. 115/75 provided exemption benefits for products falling under Tariff Item 68 if manufactured in an oil mill or solvent extraction industry. Given the Tribunal's classification of Acid Oil under Tariff Item 68, the exemption benefit was deemed admissible.

The Tribunal held that the grant of refund for the duty paid under Tariff Item 68 would be subject to the provisions of Section 11B(2) of the Central Excise Act, 1944.

3. Binding nature of the Supreme Court's decision in Kusum Products Ltd. on the Tribunal

A significant point of contention was whether the Supreme Court's decision in Kusum Products Ltd., which upheld the Tribunal's classification of Acid Oil under Tariff Item 12, was binding.

The Tribunal noted that the Supreme Court's dismissal of the appeal in Kusum Products Ltd. was in limine (at the admission stage) and did not constitute a binding precedent. The Supreme Court had observed that no contrary decision had been brought to its notice and declined to interfere on the grounds that the matter was technical.

The Tribunal referenced the Supreme Court's ruling in Sun Export Corporation, which stated that an in limine dismissal of a civil appeal does not serve as a binding precedent. Therefore, the Tribunal felt free to reconsider the classification of Acid Oil on its merits.

Separate Judgments

Majority Judgment:

The majority of the Tribunal members concluded that Acid Oil should be classified under Tariff Item 68, not Tariff Item 12. They based their decision on the chemical composition of Acid Oil, its distinct classification in international nomenclatures (CCCN and HSN), and technical literature. They also held that the exemption benefit under Notification No. 115/75 would be applicable.

Dissenting Judgment by Member (J):

One member dissented, arguing that the Supreme Court's decision in Kusum Products Ltd. was binding and should not be disregarded. The dissenting member maintained that Acid Oil should be classified under Tariff Item 12, consistent with the Supreme Court's decision and the Tribunal's earlier ruling in Kusum Products Ltd.

Orders

1. Appeals E/3326-3327/88-C (Prag Vanaspati v. CCE): Dismissed.
2. Appeal E/4139/88-C (Ahmed Oomerbhoy v. CCE): Allowed, with the finalization of refund claims subject to Section 11B(2) of the Central Excise Act, 1944.
3. Appeal E/3261/91-C (CCE v. Oswal Vanaspati & General Industries): Allowed.

The majority judgment established that Acid Oil is classifiable under Tariff Item 68, while the dissenting opinion upheld the classification under Tariff Item 12, adhering to the Supreme Court's decision in Kusum Products Ltd.