1991 (8) TMI 193 - AT - Central Excise

Summary

Issues:
Challenge of levy of cess on cotton seed oil produced by solvent extraction and expeller methods. Determination of whether cotton seed oils extracted by expeller method qualify as "vegetable oil." Limitation issue regarding demands raised in show cause notices.

Analysis:
The appellants contested the imposition of cess on cotton seed oil produced through solvent extraction and expeller methods. The High Court's judgment in Bhasir Oil Mills v. Union of India clarified that oil extracted solely by solvent extraction is not considered "vegetable oil" and is exempt from cess under the Cess Act. However, the question remained whether cotton seed oils extracted by expeller method fall under the definition of "vegetable oil."

The appellants operated a cotton seed processing complex, producing oils by both expeller and solvent extraction methods. The Vegetable Oils Cess Act, 1983, aimed to levy cess on vegetable oils for industry development. The Act lacked a specific definition of "Vegetable Oil," referencing the definition in the National Oilseeds and Vegetable Oils Development Board Act, 1983. The Act defined "Vegetable Oil" as oil from oilseeds or plant materials containing glycerides, excluding oils processed post-recovery.

The appellants argued that only oils produced directly, not those requiring further processing, should be subject to cess. However, the Act encompassed all vegetable oils from oilseeds or plant materials, not limited to edible oils. The distinction between recovered and produced oils was not tenable, as the Act covered all vegetable oils regardless of their consumption readiness. The Act excluded only refined oils and oils processed post-recovery from the definition of "vegetable oil."

The Tribunal's decision in Jayalakshmi Cotton and Oil Products (P) Ltd. v. Collector of Central Excise was deemed applicable to the present case, upholding the levy of cess on cottonseed oil extracted by the expeller method. The issue of limitation regarding demands raised in show cause notices was raised belatedly. As lower authorities did not address this, the matter was remanded for a decision on the limitation aspect, setting aside the demands and instructing the Assistant Collector to re-adjudicate after affording the assessees a personal hearing.

In conclusion, the appeals were disposed of with the affirmation of the cess levy on cottonseed oil extracted by the expeller method and the remand of the limitation issue for further consideration.