1998 (11) TMI 307 - AT - Central Excise

Summary

Issues:
1. Eligibility of distilled fatty acid as an input for grant of credit under Rule 57K of Central Excise Rules, 1944.

Analysis:
The Appellate Tribunal CEGAT, CALCUTTA addressed the issue of whether distilled fatty acid is an eligible input for credit under Rule 57K of the Central Excise Rules, 1944, specifically in relation to the final product soap. The Revenue raised a reference application questioning the Tribunal's findings in Order No. A-218, dated 3-3-1998. The crux of the issue was whether distilled fatty acid qualifies as a specified input under Rule 57K(1)(a) and is eligible for credit. The Revenue argued that the Tribunal's reliance on a Supreme Court decision was misplaced as the exemption notification in that case differed from Notification No. 46/89, dated 11-10-1989, under Rule 57K(1)(a). The Revenue contended that since distilled fatty acid is not a specified item, credit on rice bran oil used in its production should not be admissible. They emphasized the restrictive language in the notification, contrasting it with the broader interpretation given by the Tribunal.

The Respondents, on the other hand, highlighted that Notification No. 46/89 explicitly allows credit in cases where hydrogenation or hydrolysis processes are conducted outside the soap manufacturing factory. They argued that since distilled fatty acid is a byproduct of the hydrogenation process carried out externally, it should qualify for credit. Drawing parallels with a previous Supreme Court judgment cited by the Tribunal, the Respondents contended that the facts of the present case align with those considered by the Apex Court, making a reference unnecessary. They emphasized that the wording of the notification does not require distilled fatty acid to be a specified item for credit eligibility, as long as the hydrogenation process is external.

Upon deliberation, the Tribunal examined the notification, the Supreme Court judgment in Tata Oil Mills Ltd., and the specifics of the case. They noted the provision in the notification allowing credit when hydrogenation and hydrolysis occur outside the factory, which applies to the situation where rice bran oil is hydrogenated to produce distilled fatty acids. The Tribunal interpreted the use of the word "alone" in Rule 57K(1)(a) to signify that the restriction on credit eligibility pertains only to specified inputs. They reasoned that imposing further restrictions would render the provision redundant, as the products resulting from specified processes would inherently qualify for credit. Ultimately, the Tribunal rejected the reference application, citing the Apex Court's previous ruling on similar circumstances as a basis for their decision, thereby finding no new legal issue to refer to the High Court.