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TMI Blog1998 (11) TMI 192X X X X Extracts X X X X X X X X Extracts X X X X ..... CE Act. This contention was negatived by the Commissioner (Appeals) on the ground that such process carried out by the appellants is incidental or ancillary to the completion of manufactured product. As regards the classification of the item under Tariff heading 1503.10, the Commissioner has noted that the Tariff heading refers to fixed vegetable oil, other than those of heading 1502, which have undergone subsequent to their extraction any one of the following processes, namely :- (1) Treatment with alkali or acid (2) Bleaching (3) Deodorisation 4. Noting the contentions of the appellants for their purchasing vegetable oil from the open market including these processes, therefore, it amounts to a process incidental or ancillary to the completion of manufactured product and hence it is excisable and dutiable, as a result the demands raised has been confirmed. 5. It is the contention of the appellants that such process of refining the vegetable oil does not bring into existence any other product as there is no transformation of the product resulting in a different product with different name, character or use. It is also stated that any process which is incidental or ancil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been held to be not a process of manufacture, therefore, refining the oil by no means can be held to be a process of manufacture as it merely improves the quality by removing the impurities and the vegetable oil remains the vegetable oil, hence the lower authorities have not appreciated the question in the right perspective under the law laid down from the times of the judgment rendered by the Supreme Court in the case of Tungabhadra Industries Ltd., which has since been followed in number of judgments subsequently. Therefore, it is his contention that the law laid down on the term manufacturer in the case of Union of India v. Delhi Cloth and General Mills Co. Ltd. as reported in 1977 (1) E.L.T. J 199, also deals with an issue pertaining to manufacture of vanaspati. In that case also the manufacturers purchased groundnut and til oil from the open market or directly from the manufacturers of such oil. The oils thus purchased are subjected to different processes in order to turn them into Vanaspati. The Hon ble Supreme Court after a detailed discussion on the aspect pertaining to `manufacture upheld the High Courts view that there is no legal basis for demand for excise duty and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... subject goods admittedly produced for industrial purposes and not for human consumption. Therefore, they will not fall under Tariff Item 13. In this regard, the Supreme Court referred to the earlier judgments rendered in the case of Tungabhadra Industries Ltd. v. The Commercial Tax Officer, Champaklal v. State of Gujarat and that of IVP Vital Oil Pvt. Ltd. v. Collector of Central Excise. The learned Advocate submits that in view of these judgments, the lower authorities still continuing to hold the process of refining the vegetable oil produced from the open market to be a process of manufacture resulting in a new product is in fact to show disrespect to the judgments rendered by the Hon ble Supreme Court and it amounted to not following the ratio of the Hon ble Supreme Court. 7. The learned DR reiterated the departmental stand and added that there is a definition made in the Tariff itself and as the tariff entry refers to the processes, therefore, such processes carried out would bring into existence a new commodity. 8. Countering these arguments, the learned Advocate submits that some entries in the tariff could not by itself bring into existence an article as has been held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in before the Hon ble Supreme Court as in the case of M/s. Tungabhadra Industries Ltd. as far back in 1969. It is well settled that the judgment of the Hon ble Supreme Court is law and is binding on all the authorities. This Bench had an occasion to examine a similar issue in the case of Collector of Central Excise v. Jayant Oil Products (P) Ltd. as reported in 1995 (77) E.L.T. 360 (T) = 1995 (7) RLT 586, wherein the conversion of castor oil into dehydrated castor oil was held to be not amounting to a process of manufacture and it was held that a new product does not come into existence. In this regard, the judgment rendered by the Hon ble Supreme Court in the case of Collector of Central Excise v. Jayant Oil Mills Pvt. Ltd. as reported in 1989 (40) E.L.T. 287, CCE v. Jayant Oil Mills as reported in 1993 (67) E.L.T. 986 and that of Tata Oil Mills v. Collector of Central Excise as reported in 1986 (24) E.L.T. 290, was relied. 10. In the case of Collector of Central Excise v. Jayant Oil Mills, as reported in 1993 (67) E.L.T. 986, the Tribunal held that unless it can be shown that the change in the essential properties of the oil inasmuch as that a new commodity has come into existe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fact that the appellants had subjected these goods to one or more aforementioned processes is also not in dispute. Therefore, there is a lot of force in the department s contention that the goods were classifiable under Heading 1503.10. 14. It is noteworthy in this connection that the new tariff utilises many legal fictions and treats many a processes as amounting to manufacture, by giving indication to this effect in a section note, chapter note or in the heading itself. Whereas in case of many chapters, the legal fiction has been incorporated in one of the chapter notes and it has been indicated what shall amount to manufacture or shall be deemed to be manufacture as, for example, in Chapter 30 (chapter note 5) (and many other chapters already noted in various Tribunal s orders). In the present case, the processes amounting to or deemed to be manufacture have been mentioned, instead of chapter notes, in the heading itself. Therefore, in my view, they have to be taken into account for the purpose of determining whether in a particular case, the goods were classifiable under this heading or sub-heading. 15. The appellants have cited a number of judgments of the High Courts and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on incorporated in the tariff, a particular process or processes (whether they include refining or purification or not) is deemed to be a process of manufacture and the products thereof have been specifically incorporated in the tariff entry, the legal position flowing therefrom is required to be taken cognizance of. 20. In the present case, the learned Collector has erred only to the extent of observing that the processes were incidental or ancillary to the completion of the process of manufacture; But, perhaps, in so observing, he was guided by the fact that these processes are undertaken after extraction of the fixed vegetable oils. However, what is important is that these processes have been incorporated in the heading itself and products obtained by these applications have been explicitly included in the heading. 21. While a mere entry in a tariff heading may not sufficient to consider an item as an excisable product, the situation arising from incorporation of specific processes in a chapter note or heading itself creates a point of distinction which cannot be overlooked. 22. The example of conversion of castor oil into dehydrated castor oil also, in my opinion, does no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... difference of opinion matter was argued before me by Shri Ravinder Narain learned Senior Advocate for the appellants and by Shri H.K. Jain learned Senior Departmental Representative. I am recording below my order as the third Member. 28. Learned Senior Counsel submitted that the appellants herein purchase duty paid in respect of Vegetable Oil and refine the same. The department has classified the product under sub-heading 1503.10 on the ground that this heading takes in oils that have undergone refining process. He contended that the view of the departmental authorities which has been shared by the Vice President in his order that the various decisions cited in support of the appeals about oils subjected to processes being treated as oils only not liable to duty are not relevant in the present appeals in view of the new Tariff and the amended provisions of Section 2(f) of Central Excise Act, 1944 as to what constitutes manufacture. Such a view is not correct, he contended since, by the amended provisions of Section 2(f) of the Act, the term manufacture includes only a process which is specified in relation to any goods in the Section or Chapter notes of the Central Excise Tariff ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riff, the decisions have been that the process of refining vegetable oils did not amount to manufacture and involved no excise duty. The only change brought about subsequent to these judgments, besides the introduction of the new Tariff, is the extended definition of manufacture under Section 2(f). That does not affect the disposal of the subject appeals as there is no reference to any processes in respect of vegetable oils as amounting to manufacture in terms of any Section or Chapter Note. 31. Learned Counsel then pointed out that the crucial question involved are whether manufacture is involved and whether they are goods. He referred to the Supreme Court decision in Moti Laminates Pvt. Ltd. (supra). In paragraph 7 of the said judgment he stated, the Court had observed as follows : The duty of excise being on production and manufacture which means bringing out a new commodity, it is implicit that such goods must be useable moveable saleable and marketable. The duty is on manufacture or but the production or manufacture is carried on for taking such goods to the market for sale. The obvious rationale for levying excise duty linking it with production or manufacture is that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt decisions in Moti Laminates and Bhor Industries have laid down that only when goods answer the test of marketability they are to be taken as having been manufactured and dutiability will arise. Mere figuring in the Tariff Schedule is not enough without the marketability criterion being answered. Manufacture and goods are on the same pedestal. The extended definition of manufacture can only be on the basis of Chapter Note or Section Note if any process is specified therein as amounting to manufacture and not otherwise. That is not satisfied here. He reiterated his plea that the order of the Judicial Member may be concurred with. 33. I have considered the submissions. I have gone through the two orders before me. I have perused the judgments and decisions cited. The issue for decision is whether Tariff sub-heading 1503.10 covering (Fixed vegetable oils, other than those of Heading No.15.02) which have undergone subsequent to their extraction any one or more of the following processes, namely : (1) Treatment with an alkali or acid. (2) Bleaching. (3) Deodorisation". will justify the levy of duty under that sub-heading on Fixed vegetable oils subjected to refining. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly, incapable of any use. It was in view of its short life and the fact that it could not be used as such without any further processing or application of heat or pressure that it was held by the Supreme Court that it could not be considered as goods on which any excise duty could be levied. It was observed that the plea on behalf of the department that merely because the intermediate product was resol and it was one of the items mentioned under item 15A it was excisable to duty ignored the basic and primary test for excisability of duty. It was by applying the same test of marketability that the Court held in the Bhor Industries and Ambalal Sarabhai cases that the disputed items in question were not excisable. Thus, in the former case, crude PVC films arising as intermediate product in the course of manufacture of leather cloth, jute matting and PVC tapes were held to be non-excisable. In the latter case, starch hydrolysate produced for captive consumption were held to be not marketable and hence not excisable to duty. In the present appeal, there is no dispute about the marketability of the refined oils. The test of marketability as a factor for deciding excisability is satisfied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons which provided for only oils with no separate provision for oils not subjected to processing and oils subjected to processing. 34. The difference in the wording of entries in the different statutes have their effect on the question whether processed oil is different from the unprocessed oil. Thus, in Tungabhadra Industries case (AIR 1961 Supreme Court 412) it was held that Hydrogenated oil continues to be groundnut oil despite the chemical process for hardening it, by the oil absorbing hydrogen resulting in inter molecular change but in the Central Excise context the groundnut oil attracted classification under Tariff item 12 and Hydrogenated Groundnut oil fell under item 13 as vegetable product. These were different products falling under different items of the Tariff. The validity of classification of vegetable product under Tariff item 13 was not called into question on the ground that the same continued to be the same as the unhydrogenated constituent oils. In Union of India v. Delhi Cloth and General Mills Co. Ltd. 1977 E.L.T. J 199 also there was no challenge to the classification and levy of duty on vegetable product (vanaspati) obtained by hydrogenation of vegetable n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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