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TMI Blog1993 (9) TMI 316X X X X Extracts X X X X X X X X Extracts X X X X ..... tion, inasmuch as the provisions of Section 8 of the Central Excises and Salt (Amendment) Act of 1985 made effective from 27-12-1985 required that all proceedings immediately before that date under proviso to sub-section (i) of Section 11A of the Principal Act which is pending before the Assistant Collector and any matter arising out of or connected with such proceedings which is so pending stood transfer to the Collector of Central Excise. Therefore, the de novo adjudication proceedings could have been initiated only by the Collector of Central Excise, Guntur, and only the said Collector had jurisdiction to issue the purported Review show cause notice dated 31-1-1986, in the de novo adjudication proceedings. The issue of the Revised show cause notice by the Superin tendent of Central Excise, Guntur and the adjudication thereon by the Assistant Collector of Central Excise, Guntur are, therefore, illegal and the demand made pursuant to the illegal proceedings should be set aside. (b) Furthermore, even otherwise the demand proceedings is barred by limitation under Section 11A (1) of the Central Excises and Salt Act, 1944. The appellants submit that the longer period of lim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial Gazette. 6. Section 2 of the Act which defines certain terms used in the Act does not define Vegetable Oil. Sub-section (2) of the Section 2 provides that the words and expressions used but not defined in the Act and defined in the National Oilseeds and Vegetable Oils Development Board Act, 1983 (Act 29 of 1983) shall have the meanings respectively assigned to them in that Act. The expression Vegetable Oil has been defined in Section 3(h) of Act 29 of 1983 which is as follows : Vegetable oil means any oil produced from oilseeds, or any other oil bearing ma terial of plant origin, and containing glycerides but does not include any such vegetable oil which has been subjected to any processing subsequent to the recovery of oil. 7. The contention of the appellants is that according to the definition of the expression vegetable oil , oil produced shall be from (i) oil seeds (ii) any other oil bearing material of plant origin. The words but does not include any such vegetable oil which has been subjected to any processing subsequent to the recovery of oil are conjunctive to the main part of the definition and, therefore, the definition of vegetable oil expressly provide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rose as a result of the remand directions by the Collector of Central Excise (Appeals), Madras contained in his order of 27-12-1985] for the period 1-3-1984 to 31-8-1984 and confirmed in the order-in-original dated 9-4-1986 and order-in-appeal dated 30-6-1987. The learned Counsel s contention is that the show cause notice of 31-1-1986 is without jurisdiction as it has been issued by the Superintendent of Central Excise (adjudicated upon by the Assistant Collector) when the Central Excises and Salt Act had been amended and in terms of the provisions of Section 8 of the Central Excises and Salt (Amendment) Act of 1985 made effective from 27-12-1985, all proceedings before that date under proviso to sub-section (1) of Section 11A which is pending before the Assistant Collector and any matter arising out of or connected with such proceedings which are so pending stood transferred to the Collector of Central Excise (emphasis supplied). He, therefore, contends that de novo adjudication proceedings which originated by the issue of show cause notice dated 31-1-1986 could have been initiated by the Collector of Central Excise who alone had the jurisdiction to is sue the revised show cause n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on account of post manufacturing elements was not admissible in law. In the appeal before us the situation is entirely different. There is a change in the Statute by which the authority to issue the show cause notice in respect of recovery extending beyond the normal period of limi tation has been vested in the Collector who alone is the competent officer to is sue such show cause notices, after 27-12-1985. In a recent decision of the Tribunal reported in 1991 (56) E.L.T. 71 in the case of Woodpaper Ltd. v. Collector of Central Excise the view has been taken that the act of issuing show cause notice by the Superintendent after amendment of Section 11A by Act No. 79 of 1985 is a nullity and the proceedings arising from such a notice is void ab initio. The notice in that case was signed by the Superintendent on 26-12-1985 on which date the amendment had not come into effect. The show cause notice had not been despatched on 26-12-1985. On 27-12-1985 the show cause notice could still be withdrawn and re-issued by the Collector on whom the power had been vested in the amended Section 11A. Admittedly in this case, the show cause notice has been issued only after the amendment has come i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of Hon ble Bombay High Court in the case of Bhasir Oil Mills reported in 1990 (47) E.L.T. 305. 18. The learned Counsel has basically contended that the appellant s product being processed oil was in any eventuality not a vegetable oil in terms of the prescribed definition and therefore, was not leviable to Cess. 19. The learned Advocate has also sought to distinguish between production, recovery and processing of oil in this context. 20. It was therefore, necessary to go through the technical aspects before arriving at any decision. 21. A perusal of well recognised books on the subject, such as Encyclopaedia of Chemical Technology (3rd Edition) by Kirk and Othmer and Bailey s Industrial Oil and Fat Products (4th Edition) by Daniel Swern shows that manufacture or production of vegetable oil basically includes : (1) Recovery of Oil from the oil bearing material by extraction of oils and fats; and (2) further processing of the crude oil so recovered by refining, degumming and bleaching etc. 22. According to Bailey, the separation of oils and fats (1) from oil-bearing animal and vegetable materials constitutes a distinct and specialized branch of fat technology. The wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itution of solvent extraction for pressing methods increases the yield of oil from soyabeans by 12.1%; in the processing of cotton seed the increase is 11.5%........ . 33. Crude fats and oils produced by rendering, expression, or solvent extraction contain variable amounts of non-glyceride impurities. The impurities in high-grade animal fats and certain vegetable oils, such as coconut and palm kernel oils, consists principally of free fatty acids. In most vegetable oils, as well as in animal fats rendered from low-grade materials, however, there are signifi cant amounts of other substances . The object of refining and bleaching is to remove the objectionable impurities in the oil with the least possible damage to either the glycerides or the tocopherols or other desirable impurities and with the least possible loss of oil. As used here, the term refining refers to any purifying treatment designed to remove free fatty acids, phosphatides, or mucilaginous material, or other gross impurities in the oil; it excludes bleaching and also deodorization . The term bleaching is reserved for treatment designed solely to reduce the colour of the oil. Very little material is remo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent does not really help the cause of the appellant as would be evident from what follows. 40. The Show Cause Notice in the instant case refers to the vegetable oil produced from the cotton seeds. 41. In reply to the Show Cause Notice dated 3-5-1986, the appellants have admitted this fact and merely emphasised that in their case the oil was subjected to processing subsequent to its recovery in a continuous process and was therefore, not liable to Cess. 42. It has been argued that cottonseeds are necessarily required to be decorticated and delinted as a pre-condition and the meat obtained from their crushing has got its own separate identity name specification, characteristics etc. Hence the oil extracted from this meat cannot be termed as that of plant origin and was not liable to Cess under Vegetable Oil Cess Act, 1983. 43. However, as we have noted above the decortication, cooking, crushing, flaking and expression, extraction etc.; are a part of the process of recovery of oil from the oilseeds and therefore, if at a particular stage in this processing the crushed seed is called as meat that does not in my opinion make any difference to the basic fact that this was a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsumed or utilized - (i) as such or after subjection to any process or processes; or (ii) for the manufacture of any other commodity; whether in a continuous process or otherwise, in such place or any premises appurtenant thereto, specified by the Collector under sub-rule (1), shall be deemed to have been removed from such place or premises immediately before such consumption or utilization. 47. Accordingly if an excisable product is manufactured but captively consumed or utilised within the factory for production of another item as a final product (whether as a result of continuous process or otherwise) it is still required to bear the incidence of duty unless specifically exempted. In the instant case, appellants have not shown any notification which exempts the vegetable oil produced in the factory for captive consumption (whether by way of utilisation for further processing or refining) to be exempted from the levy of Cess. Further insofar as the third proviso, to Rule 9 is concerned, this proviso applies only to specified cases and is not relevant. 48. The Madras High Court Judgment in the case of W.S. Insulators reported in 1983 (14) E.L.T. 2184 (Mad.) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nable. However, it does not discuss the methods of expression or extraction of oil from oilseeds and therefore does not really help us in resolving the main controversy. 50. Having noted as above, it must also be mentioned in all fairness that once the Bombay High Court Judgment (supra) had been cited by the ld. Ad vocate and the ld. DR did not oppose his interpretation of this judgment, the ld. Advocate proceeded further with the matter apparently on the assumption that the Department was not contesting the relevance of the Bombay High Court Judgment (and my ld. Colleague also appears to have proceeded on this ba sis). However, with due respects, I am not in a position to go with this preposition and the proposed order in view of my observations and findings as above. This in fact means that in my opinion the quantity of vegetable oil recovered from oilseeds by one or more extraction or expression methods (including the solvent extrac tion method or a combination thereof) was liable to Cess. (However, if the raw oil so ob tained was subjected to processing subsequent to its recovery, then no further Cess shall be chargeable on such refined oil). In so far as the questio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irections of the Appellant authority. It was just not open to subordinate officers to take a different view; Therefore so long as the order of the Appellate Collector was not set aside by a Superior authority i.e. either by higher Court(s) or Tribunal, the Supdt. and the Asstt. Collector had no option but to follow the directions issued by the Appellate Collector, even if another interpretation of law was possible. 55. In this respect I consider that first and foremost it was necessary to see how the present cases arose and the Show Cause Notices got issued initially. A perusal of the record in this respect shows that the period involved in the Show Cause Notices and the orders could be conveniently indicated as in the table below - S.C. Notice Period involved Order in Original Date From To No Date 31-1-1986 1-3-1984 31-8-1984 8/86 10-4-1986 (Revised) 20-11-1985 1-6-1985 31-10-1985 11/86 5-5-1986 22-1-1986 1-12-1985 31-12-1985 12/86 7-5-1986 9-4-1986 1-1-1986 28-2-1986 25/86 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue it and AC was com petent to adjudicate the case and they were not free to act differently in terms of the ratio of the Judgment of the Allahabad High Court (supra) cited by the Jt. CDR. 60. In view of the above discussions I find no reason to interfere with the impugned order passed by the ld. Collector (Appeals) except to the extent of benefit of operation of normal time bar with reference to the date of issue of ini tial Show Cause Notice (9-10-1984) in case of covered by order-in-original No. 8/86. The appeals are otherwise rejected. Dt. 14-6-1993 Sd /- (S.K. Bhatnagar) Vice-President 61. In view of difference of opinion between Member (Judicial) and the Vice-President, the matter is submitted to Hon ble President for reference to a third Member in view of difference of opinion on the following point :- (1) Whether in the facts and circumstances of the case, Cess was leviable on the Vegetable Oil extracted from oilseeds by solvent extraction process? (2) Whether the Show Cause Notice(s) and the adjudication proceedings were valid? Sd/- (Jyoti Balasundaram) Member (Judicial) Sd/- (S.K. Bhatnagar) Vice-Pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Oil Products (P) Ltd. v. Collector of Central Excise, reported in 1990 (50) E.L.T. 268. The learned Counsel urged that in respect of the oil extracted from Cotton seed cake by the solvent extraction method, the matter stands settled by the Bombay High Court decision supra. The learned Counsel urged that in Para-31 of the Vice-President s order, there is only a partial quotation of the Para-18 of the Bombay High Court judgment and it was pleaded that a reading of the para in full of the High Court judgment, would show that oil, produced by the solvent extraction method from oil cake is not leviable to cess. As regards the validity of the show cause notice in the de novo proceeding, the learned Counsel relied upon the Supreme Court decision in AIR 1972 S.C. 1781 to say that the changes in the statute of a procedural nature will have retrospective effect. He also referred to the principles of statutory interpretation by Justice G.P. Singh to say that matter of procedure are retrospective and statute which only alter procedure has retrospective effect. The Allahabad High Court, in the case of Geep Industrial Syndicate Ltd. v. Assistant Collector of Central Excise, reported in 1990 (4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rly that both Vice-President and Member (Judicial) are agreed that mechanically expressed oil produced out of cotton seeds and sub jected to further process of refining in a continuous process is leviable to cess for which reliance been placed on the Tribunal decision in Jayalakshmi Cotton and Oil Products (P) Ltd. case. The difference of opinion is with respect of solvent extracted from cotton oil seeds cake which emerges as a by product of mechani cal crushing. On this, the Hon ble Member (Judicial) has held that the dispute is no longer alive, in view of the judgment of the Bombay High Court in the case of Bhasir Oil Mills v. Union of India (supra) wherein the Court has held that oil extracted from oil cake by solvent extraction process is not vegetable oil but a distinct commercial commodity and, therefore, no cess can be levied thereupon under Section 3 of the Cess Act as it is not covered by the definition of expres sion vegetable oil given in Section 3(h) of the Board Act. The learned Member (Judicial) has further held that the decision of the Tribunal in the case of Jayalakshmi Cotton and Oil Products (P) Ltd. fully applies to this case and on this basis, the learned Member ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant. It is, there fore, difficult for us to accept the contention raised on behalf of the Department that the oil derived from oil cakes is from the oil bearing material of plant origin within the meaning of Section 3(h) of the Board Act. We thus accept the con tention raised on behalf of the petitioners that as regards the oil derived from the oil cakes by the process of solvent extraction plant no cess can be levied upon the same under Section 3 of the Cess Act as it is not covered by the definition of the expression vegetable oil given in section 3(h) of the Board Act. The show cause notices given by the Department in regard to the oil derived from the oil cakes therefore need to be quashed. It is, therefore, that the High Court has concluded in Para-18 of its order (which has been partially quoted by the Hon ble Vice-President) as follows :- In the result, the instant writ petitions are partly allowed. As regards the question of oil derived from the oilseeds and rice bran the petitioners in these writ petitions shall raise their contentions before the competent authorities which had issued the show cause notices to them and pursue their statutory remedies in that regard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... und for adjudication afresh. In the de novo provisions the starting point is the original show cause notice of 9-10-1984. This show cause notice demands cess for a pe riod 1-3-1984 to 31-3-1984 which is clearly referring to a period beyond six months and the show cause notice has also cited Section 11A for such recovery. It has also mentioned :- They have failed to furnish the particulars of extraction of such oil in time to the Central Excise Department and they suppressed the fact of production from the knowledge of the Department . With the amendment of Section 11A from 27-12-1985 in such a situation where suppression of fact is alleged only Collector can issue the show cause notice. This position has been affirmed by the Division Bench of the Karnataka High Court in the case of Ralectronics Ltd. v. Assistant Collector of Central Excise, reported in [1993 (67) E.L.T. 810 (Kar.) = (1992) 40 ECC 399 (Kar.)], on an appeal against an order dated 26-3-1992 passed by the Single Judge in Writ Petition No. 2280 of 1989, reported in [1992 (60) E.L.T. 388 (Kar.) = (1992) 39 ECC 69 (Kar.)]. The Division Bench held that on a reading of Section 11A with the proviso makes it clear that t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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