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TMI Blog1984 (2) TMI 321X X X X Extracts X X X X X X X X Extracts X X X X ..... in the manufacture of soap by following the procedure set out in Chapter X of the Central Excise Rules, 1944 in terms of Notification No. C.E.R. 8(3) 56-C.E., dated 14-1-1956. He considered that Notification No. 181/71-C.E., dated 9-10-1971 provided that no exemption should be allowed in respect of V.N.E. oil used in the manufacture of finished excisable goods if the finished excisable goods produced by the manufacturer were exempted from the whole of the excise duty leviable thereon or were chargeble to nil rate of duty. Notification No. 181 was itself a notification that amended an earlier Notification No. 33/63, dated 1-3-1963. He accordingly ordered that Hindustan Lever should pay duty on the processed vegetable non-essential oils used in the manufacture of the extra hard V.P. (which was subsequently used in the manufacture of soap, not within the same factory but at Garden Reach factory of M/s. Hindustan Lever). 2. The dispute arose from the fact that Hindustan Lever used vegetable non-essential oil to manufacture what the Assistant Collector of Central Excise calls extra hard vegetable product. The extra hard vegetable product is cleared without payment of duty for the m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the finished excisable goods produced from the vegetable non-essential oil should not be wholly exempted from the duty of excise or chargeable to nil rate of duty. The Central Excise authorities considered that the hardened vegetable product removed to the Garden Reach factory without payment of duty to be finished excisable goods and since this goods is not subjected to excise duty, the exemption was forbidden. 5. It appears that the hardened vegetable oil or product was cleared without payment of duty as it moved under Chapter X procedure in accordance with Notification No. C.E.R. 8(3) 56-C.E., dated 14-1-1956. There appears to be no other reason for this clearance without payment of duty. In any case there appears to be no doubt that the Central Excise itself permitted the clearance of the hardened oils free of duty, and the hardened oils were taken with the knowledge of the Department to the Garden Reach factory to be made into soap. The Assistant Collector himself says in his order that V.P. with melting point above 45O centigrade was considered to be extra hard V.P. in respect of which Chapter X of the Central Excise Rules, 1944 was fully enforced for all removals. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e it away from the category of processed oil. 8. The learned Counsel for the department said that there was no record that the appellant had sought exemption under Notification No. 33/63-C.E. from the Department at any time. He also said that the finding of the Tribunal in 1983 E.L.T. 999 that hardening by hydrogenation was essential for the purpose of soap making was not correct and that there are soaps like liquid soaps which do not involve hardening of the raw material at any stage. He also referred to The Wealth of India (a dictionary of Indian raw materials and industrial product-Part VIII Si Ti published by the Information Directorate, CSIR, New Delhi). At page 63, the volume has a table which shows the consumption pattern of oil and fatty materials in the organised soap making sector. This table shows the raw materials as being coconut oil, and hard oils (tallow, mahua, sal oil, hydrogenated vegetable oil etc., etc.) and soft oils (such as rice bran oil, cusum oil, groundnut oil). He argued that it would not be correct to say that hardened vegetable oil fall under Items 13, 14 or 15. Therefore, the exemption to the raw material is not merited as it is given only when i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9(2) and its applicability because this is a question of law. He said that the Department claims that notification was not sought by the appellants. If that is so, it is not clear how the Department was giving it to the appellant for so long till the notice was issued, and it continued to obtain benefit under the notification from 1963. He quoted AIR 1961 S.C. 412 which ruled that despite hydrogenation the oil remained an oil. 10. Much argument has gone into for and against this appeal. We would like to start out with the argument of the Department that hydrogenation is not a necessary process in manufacturing soap from vegetable oil. The counsel was unable to produce any authority for this statement. His reference to liquid oil is not apposite because liquid oil is a potassium soap different from the hard sodium soaps that are ordinarily used. The book he referred to, i.e. The Wealth of India does not prove what he says and we are not able to see the relevance of this publication to prove that hydrogenation is not a necessary step for making soap from vegetable oils. It is a well-known fact that in these cases and in the overwhelming majority of cases, hydrogenation is an e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herefore be finished excisable goods that have been manufactured and the free clearance of which would disentitle the vegetable non-essential oil from exemption under Notification 33/63. 11. Once we come to this stage, we will see that hydrogenation is no longer an important factor because then we find a vegetable non-essential oil that had been used in the production of soap. This production has not been disputed by anybody. In respect of Vegetable Vitamins (Appeal No. 2/74-C), the Counsel for the Department is not aware of the fact of actual use in the manufacture of soap. We therefore assume that it was so used as there is no claim to the contrary. The vegetable non-essential oil moving under Chapter X procedure is then known to have been used in the manufacture of soap. The Department informed us that there was failure to move the goods under rule 56A. But this played no part in events that gave rise to the demands; only the issue of Notification 181 and we have seen why this notification will not bar the exemption. It was only the emergence of the hardened oil which the department called a vegetable product and which it thought was assessable under Item 13 that led to the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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