1999 (1) TMI 138 - AT - Central Excise

Issues Involved:
1. Entitlement to claim the benefit of Notification 46/89.
2. Interpretation of Rule 57K, 57A, and 57L of the Central Excise Rules.
3. Eligibility for money credit on Rice Bran Oil (RBO) used in soap manufacturing.
4. The role of intermediate products (fatty acids) in the money credit scheme.
5. Applicability of the Supreme Court's decision in the case of Tomco.

Issue-wise Detailed Analysis:

1. Entitlement to Claim the Benefit of Notification 46/89:
The appellants are manufacturers of soap and claim the benefit of Notification 46/89, which specifies that vegetable oils used in soap manufacturing are eligible for money credit. The notification aims to promote the use of minor oils in soap manufacturing. The dispute arises from the Collector's interpretation that the appellants are not entitled to this benefit because the fatty acid, an intermediate product, is exempt from duty.

2. Interpretation of Rule 57K, 57A, and 57L of the Central Excise Rules:
Rule 57K allows the government to specify final products and raw materials eligible for money credit. Rule 57L states that money credit cannot be allowed if the final product is exempt from duty. The department contends that since the fatty acid is exempt under Notification 12/89, the appellants cannot claim money credit. However, the appellants argue that the fatty acid is an intermediate product used in soap manufacturing, which is the final product.

3. Eligibility for Money Credit on Rice Bran Oil (RBO) Used in Soap Manufacturing:
The appellants process RBO supplied by Hindustan Lever Ltd. (HLL) into fatty acids and other products, some of which are used in their soap manufacturing. The department argues that the appellants are not entitled to money credit because the fatty acid is exempt. The appellants counter that they comply with the notification and trade notices, and the fatty acid is used in soap manufacturing, making them eligible for money credit.

4. The Role of Intermediate Products (Fatty Acids) in the Money Credit Scheme:
The appellants process RBO twice, obtaining fatty acids, glycerine, and pitch. The fatty acids are used in soap manufacturing. The department argues that the fatty acids are exempt and not final products under Rule 57K. The appellants argue that the intermediate products should not disqualify them from money credit, as they are ultimately used in soap manufacturing.

5. Applicability of the Supreme Court's Decision in the Case of Tomco:
The appellants cite the Supreme Court's decision in Tomco, which allowed the benefit of a similar notification for using RBO in soap manufacturing. The department argues that the case is different because it involved set-off, not money credit. However, the principle of encouraging the use of RBO in soap manufacturing applies to both cases.

Judgment:
The tribunal concluded that the appellants are entitled to the benefit of Notification 46/89. The notification and relevant rules do not exclude intermediate products like fatty acids from the money credit scheme. The appellants' use of fatty acids in soap manufacturing aligns with the notification's intent. The tribunal found the Collector's interpretation incorrect and allowed the appeals with consequential relief.

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