1998 (11) TMI 192 - AT - Central Excise

Summary

Issues Involved:
1. Whether the refining process of vegetable oils amounts to a manufacturing process under Central Excise law.
2. Classification of the refined vegetable oils under sub-heading 1503.10 of the tariff.
3. Levy of excise duty on the refined vegetable oils.

Detailed Analysis:

1. Manufacturing Process under Central Excise Law:
The primary issue is whether the refining process carried out by the appellants on vegetable oils purchased from the open market constitutes a manufacturing process under Section 2(f) of the Central Excise Act. The appellants contended that refining does not amount to manufacture as it does not result in a new product with a different name, character, or use. They relied on several Supreme Court judgments, including Tungabhadra Industries Ltd. v. The Commercial Tax Officer (AIR 1961 SC 412), which held that processes like hydrogenation do not result in a new product. The Supreme Court emphasized that for a process to be considered manufacturing, it must bring into existence a new product known differently in the market.

2. Classification under Sub-heading 1503.10:
The Commissioner (Appeals) classified the refined vegetable oils under sub-heading 1503.10, which covers fixed vegetable oils that have undergone processes such as treatment with alkali or acid, bleaching, or deodorization. The appellants argued that such classification was incorrect as the refining process does not transform the oil into a new product. The Commissioner, however, noted that the processes mentioned in the tariff heading implied that the refined oils fall under sub-heading 1503.10.

3. Levy of Excise Duty:
The lower authorities held that the refining process made the vegetable oils excisable and dutiable. The appellants contested this, arguing that the refined oil remains the same substance as the raw oil and should not be subject to excise duty. They cited judgments such as Union of India v. Delhi Cloth and General Mills Co. Ltd. (1977 (1) E.L.T. J 199) and Prem Ji Haridas & Co. v. Municipal Corpn. of Greater Bombay (1997 (89) E.L.T. 658), which supported their stance that mere processing does not amount to manufacturing for excise purposes.

Separate Judgments:

Majority Opinion:
The majority opinion, including a detailed analysis by the Vice President and a third Member, concluded that the refined vegetable oils are excisable under sub-heading 1503.10. They emphasized that the tariff heading specifically mentions the processes, and therefore, the refined oils fall under this category. The majority held that the refined oils are marketable and the processes undertaken are covered by the tariff heading, making them excisable.

Dissenting Opinion:
The dissenting Member (Judicial) argued that the refining process does not amount to manufacturing as per the established legal principles laid down by the Supreme Court. He emphasized that the refined oil remains the same product and should not be classified under sub-heading 1503.10 or be subject to excise duty. He criticized the lower authorities for not following the Supreme Court's judgments and for judicial indiscipline.

Final Order:
In view of the majority opinion, the appeals were rejected, and the refined vegetable oils were held to be excisable under sub-heading 1503.10, confirming the levy of excise duty.