9911796707
TMI Blog1998 (4) TMI 150X X X X Extracts X X X X X X X X Extracts X X X X ..... lier disagreed with the view taken by a three Member Bench of the Tribunal in Kusum Products Ltd. v. Collector of Central Excise, Calcutta - 1985 (19) E.L.T. 479 that Acid Oil attracted classification under Tariff Item 12 as Vegetable Non-Essential Oil. The brief factual details in these appeals are as follows. M/s. Prag Vanaspati Products (for short, PVP), manufacturing Acid Oil was paying Central Excise duty thereon under the erstwhile Tariff Item 68. On 20-5-1985, PVP filed revised classification list No. 47/85 seeking classification under Tariff Item 12. Show cause notice dated 13-1-1986 was issued by the Assistant Collector, Aligarh stating that Acid Oil, not being Vegetable Non-essential Oil (for short, VNE oil) and not being known as such in trade parlance, was required to be classified under Tariff Item 68. PVP took the stand that Acid Oil was nothing but VNE oil classified under Tariff Item 12. The Assistant Collector on 28-2-1986 overruled the contention and approved the price list, classifying Acid Oil under Tariff Item 68. Meanwhile, PVP filed a refund claim for Rs. 1,03,977.66 out of duty paid on Acid Oil under Tariff Item 68 during the period from 13-12-1984 to 29-1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of notice has remained absent and has sought decision of the appeal on merits. 4. The appeals came up for consideration before the Benches concerned. It was felt that the decision in Kusum Products Limited - 1985 (19) E.L.T. 479 (Tribunal) was not correct and the following questions were referred to a larger Bench. E/3326/88 and E/3327/88 "Whether the Acid Oil is required to be treated as VNE oil and classified as such under Tariff Item 12 as held by the Tribunal in the case of Kusum Products or it is required to be considered as a product other than VNE oil and was, therefore, required to be classified under Tariff Item 68 and the appeals were required to be disposed of accordingly." E/4139/90 and E/3261/91 "Whether Acid Oil is a VNE oil classifiable under Tariff Item 12 (old Tariff) or it is not a vegetable oil (but a product made from vegetable oils) classifiable under Tariff Item 68 (old Tariff)". The President, having constituted the larger Bench and placed the appeals for hearing before the Bench, we have heard the appeals and propose to dispose of the appeals by this order. We have heard Shri J.M. Sharma, Consultant for AOB, Shri Bipin Garg, Advocate for PVP, Sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... E Oil in Heading 15.07 which shows that the two are separate products and Acid Oil is a new product different from VNE Oil. 8. The three Members of the Bench were unanimous in holding Acid Oil to be VNE Oil and classifiable under Tariff Item 12. Two Members indicated that Acid Oil has all the characteristics and properties of VNE Oil and put to the same use. The Third Member referred to Chapter 6 of Bailey's "Industrial Oil and Fat Products" by Deniel Steven Vol. I, IV Edition and indicated that acid oil is recognized as oil, that by VNE oil is meant oil of vegetable origin and which is not essential oil, that Acid oil is of vegetable origin is not an essential oil and Tariff Item 12 covers all sorts of VNE oil and not confined to only oils which are the immediate result of extraction from vegetable oil and covers even oils which may be the result of refining or cleavage of oils so long as they are recognized as oils. 9. The Vice President in the reference order sought support from HSN classification of Acid Oil under 15.19 and Explanatory Note B which states that Acid Oil has a relatively high free acid content. It was noticed that Vegetable Oil as known to the market and used ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - 1989 (39) E.L.T. 18 (All.) in support of the contention that Acid Oil not being obtained directly from plant or part of plant is not vegetable oil. 10. Shri J.M. Sharma pointed out that AOB, besides purchasing VNE Oils also manufactured VNE oils such as Palm Oil, Groundnut Oil, Neem Oil, etc. by crushing the seeds and the unprocessed VNE Oil is sent to the refining section for purification and refining for the manufacture of Refined Oil and Vanaspati. VNE is treated with Caustic Soda to remove free fatty acid which gets neutralised at this stage and collects separately in the form of soap stock, which is a by-product. Soap stock is treated with Sulphuric Acid and the resulting mixture contains free fatty acid which is then boiled with steam. 11. The oily material rises to the surface and the aqueous layer containing free Sulphuric Acid, Sodium Sulphate and impurities form the lower layer. The aqueous layer is drawn off and the oily layer boiled with fresh water to wash out residual Sulphuric Acid and other soluble impurities. The free fatty acid content of acid oil is seldom below 80%. Shri J.M. Sharma fully supported the observations and conclusions in the reference order. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cate, who assisted us stated that Kusum Products Ltd., 1985 (19) E.L.T. 479 (Tribunal) has been correctly decided. He explained the difference between essential oil and non-essential oil and pointed out that Acid Oil is not essential oil and hence has to be regarded as non-essential oil. He relied on technical literature to contend that the observation in the reference order that Acid Oil is not even oil, is not correct. According to him, considering the composition, characteristics and properties, Acid Oil has to be regarded as VNE Oil as it continues to be oil of Vegetable Oil. There is nothing in the Tariff to support the stand that VNE oil is only that oil which is directly and immediately derived from Vegetable matter. Vegetable oil, though subjected to various processes, remains vegetable oil. Triglycerides are the main contents of VNE and Acid Oils. Triglycerides will have some quantity of free fatty acids. He pointed out that Fat and Caustic Soda leads to Sodium soap (soap stock) and glycerol and soap stock reacts with Sulphuric Acid to produce Acid Oil, Sodium Sulphate and free fatty acid. Reference was made to Chapter 15 of HSN as also Chapter 33 relating to Essential Oil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he chemical processes and composition of the goods in question were briefly explained by Shri Shand. He confirmed the position explained by Shri Lakhinder Singh. 18. We have taken note of the submissions made before us. We have perused the record and the judgments. While disposing of the appeal filed by the Collector against the order of the Tribunal in the Kusum Products Ltd. case, their Lordships of the Supreme Court had osberved that no decision taking a contrary view to the one taken by the Tribunal in the judgment under appeal had been brought to their notice. The matter being a technical one they declined to interfere. The appeal was not admitted. While S/Shri Sharma and Lakhinder Singh contended that this constituted dismissal of the appeal by Supreme Court in limine and as such did not have binding force and that this Bench is free to depart from the said Tribunal decision on merits, S/Shri H.K. Jain, SDR and Bipin Garg and Lakshmi Kumaran, learned Counsels contended that the Supreme Court decision upholding the Tribunal decision was binding. In the case cited by Shri Sharma [Indian Oil Corporation v. State of Bihar - 1987 (27) E.L.T. 578] the Supreme Court held that dism ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of exemption Notification 115/75, dated 30-4-1975 available to goods under Tariff Item 68. But in the decision reported in 1994 (69) E.L.T. 148, (Rajadhiraj Industries v. Collector of Central Excise, Indore) the Tribunal, however, held that the said exemption benefit was not available as the industry was not an Oil Mill or Solvent Extraction Industry. The benefit of exemption which was available to products of such industry falling under Tariff Item 68 was denied only on the above-mentioned ground, there being no controversy about the classification under Item 68. These decisions are dated 28-4-1986, 29-3-1994 and 29-10-1993 respectively. None of these reported decisions was brought to the notice of the Supreme Court while the department's appeal in the Kusum Products Ltd. case was decided much later by the Supreme Court on 4th May, 1995. As the non-admission of the appeal was only on the ground that no contrary decision was brought to the Court's notice and that the matter was a technical one, the disposal of the Civil Appeal by not admitting it, cannot be taken to be on the merits of the question involved and the Supreme Court cannot be said to have declared any law under Articl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d soap stock. This term, acidulated soap stock is also used to refer to acid oils in the book "Bailey's Industrial Oil and Fat Products", Volume, Fourth Edition at Pages 290 and 291. It is stated that the free fatty acid content of an acidulated soapstock containing 95% total fatty acids is seldom below 80% and is often 85 to 90% or more. This appellation "acidulated soap stock" to refer to acid oil is a significant one pointing appropriately to its immediate source and the process undergone. 23. The difference in the composition of the two products VNE oil and Acid oil as a factor for their separate classification argued before us is consistent with the fact that Acid oils have been separately provided for in the CCCN and HSN, distinct from vegetable oils. Thus, in the CCCN, the relevant entry is "Acid Oils from refining" classified under Heading 15.10 in the company of Fatty Acids and Fatty Alcohols which have been described in the Explanatory Notes thereunder as being obtained from fats and oils by saponification. This would be a pointer to such Acid oils being different from the Vegetable Oils themselves which were classified under other headings since the need for such speci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may be the result of refining or cleavage of such oils so long as they are recognised as oils. On such reasoning and on the ground that Tariff Item 12 was far more appropriate than the non-descript residuary Item 68, Acid Oil was classified under the former Item. This finding and the reasons therefor have been examined by us. The difference in composition of Acid Oil and VNE Oils has been referred to in the technical literature which was emphasised during the arguments addressed by Shri J.M. Sharma and Shri Lakhinder Singh which was also confirmed by Shri Shand. It is the stand taken in the Kusum order that the presence of a high free fatty acid content cannot take an oil out of the category of VNE oil. As has come out in the submissions before us which is also borne out by the literature produced, it is not that the only difference between Acid oil and VNE oil is in the free fatty acid content. The very high concentration of free fatty acid in VNE oil coupled with the near absence of triglycerides, the predominance of which is the feature in respect of VNE Oils and the unsuitability for edible purposes and suitability only for soap making set acid oils apart from the VNE oils lik ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion gets further confirmation from the HSN Headings and sub-headings. While Heading for Chapter 15 of HSN is the same as it was for Chapter 15 in CCCN, the Headings and sub-headings are more in number and more detailed. Headings 15.07 to 15.15 cover various oils and their fractions whether or not refined but not chemically modified as shown below :- 15.07 Soyabean oil 15.08 Groundnut oil 15.09 Olive Oil 15.10 Other oils obtained from olives 15.11 Palm Oil 15.12 Sunflower seed safflower or cotton seed oil 15.13 Coconut (copra) oil 15.14 Rape, Colza or Mustard oil 15.15 Other fixed vegetable Fats and Oils Under this heading 15.15 oils like Linseed oil; Maize (Corn) oil, Castor Oil, Fung Oil, Seasame Oil, Jojoba Oil and other oils have been covered under separate sub-headings. After these specific and separate headings and sub-headings have been provided for various vegetable oils, acid oils from refining have been accommodated under Heading 15.19 along with Industrial Mono Carboxylic acids and Industrial Fatty Alcohols. It is clear t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the type under dispute. Conversely, acid oils are not VNE Oils. We note that the relevant entry in the Central Excise Tariff covered Vegetable Non Essential oil, all sorts. The finding in the Kusum order was that there was nothing to indicate that the entry was meant to cover only vegetable oils directly extracted from oil seeds or other vegetable material but which may be the result of refining or cleavage of such oils as long as they are recognised as oils. This last condition is important to decide whether acid oils are VNE Oils. No doubt, the test report of the material in the Ahmed Oomerbhoy case indicated that it was oily liquid but the chemical composition shown in the same report was that it contained 79% Free Fatty Acid as oleic acid. The chemical composition of Acid oils, as distinct from VNE Oils, their use restricted to manufacture of soap as distinct from the use of VNE Oils for other purposes also, the separate provision in the CCCN and HSN will not render the Acid Oils recognisable as VNE Oils. Hence the conclusion in the Kusum order that Acid oil was classifiable under Tariff Item 12 as vegetable non-essential oil was not based on a correct appreciation of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to differ with the findings arrived at by the ld. Member (T) in his detailed order and have proposed to briefly enumerate my reasons. 26. At the outset, I do not agree with the proposition that the Hon'ble Supreme Court judgment rendered in the case of Kusum Products Ltd. is not binding on the Tribunal. Hon'ble Supreme Court has passed the following order : "IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. 4533 OF 1996 Collector of Central Excise, Calcutta-II Appellant vs M/s. Kusum Products Ltd. Respondent ORDER No decision taking a contrary view to the one taken by the Tribunal in the judgment under appeal has been brought to our notice. Since the matter is a technical one, we decline to interfere. Not admitted. Sd/- Sd/- B.P. Jeevan Reddy) (Suhas C. Sen)" New Delhi 4th May, 1995 As can be seen from the above judgment, it is not in the nature of dismissal in limine but it has been passed only after a detailed hearing and confirming the view expressed by the Tribunal in the case of Kusum Products Ltd. Therefore, the judgment rendered by the Hon'ble Supreme Court confirming the order of Kusum Products Ltd. cann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cids and some neutral oil. Such acid oil contains 50 to 80% of free fatty acids, according to the success of the separation of neutral oil (page 200 of `Oils, Fats and Fatty Foods', 4th Edition by K.A. William). In the present case the sample shows that the free fatty acid present was 49.1%. It is clear that this acid oil which is free fatty acid of some other reacted oil is a recovered product and not a VNE oil. It is also found from Brussels Nomenclature that acid oil (prepared by decomposing with mineral acid the soap-stock obtained during refining of some oil) has been placed in heading 15.10 whereas VNE oil has been placed in heading 15.07. This also clearly shows that the acid oil and the VNE oil are clearly two separate products. Acid oil is a recovered product and is not VNE oil. This acid oil is sold, quite often to other soap manufacturers. In this particular case, M/s Kusum Products Ltd. have sold this product to other soap manufacturers namely, Asiatic Soap Co., Laxmikant Kashiram, etc. It is, therefore, a remarkable commodity. Even in technical books there is reference to the fact that the acid oil which is a recovered oil, is sold with the commercial names as acid oil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and why the department says it is not a VNE oil. The process of preparing it detailed in the Collector's order does not in any way prove it is not a VNE oil. It is a VNE oil and has all the characteristics and properties a VNE oil should have. It is put to the same use. There is, therefore, everything for saying it is a VNE oil and nothing for saying it is a goods not elsewhere specified. 10. We set aside the order of the Board as it proceeds on the premise that the acid oil is assessable under item 68 of the CET. We hold it is assessable under item 12 of the CET. 11. Other arguments were produced on behalf of M/s. Kusum Products Ltd., but in view of our conclusion above, we need not go into them now. [Order per : G. Sankaran] :- 12.I have perused the order written by Shri Syiem. I would like to add a few lines. 13. Heading No. 15.07 ("Fixed vegetable oils, fluid or solid, crude, refined or purified") of the Customs Co-operation Council Nomenclature (CCCN) does not cover within its purview the by-products of refining of oils. Acid oils from refining fall in heading 15.10 ("Fatty acids; acid oils from refining; fatty alcohols"). These acid oils have a relatively high free ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m No. 12, CET covers, as we have noted, all sorts of vegetable non-essential oils. There is nothing in the wording of the item to even remotely suggest that the scope of the item is confined to oils which are the immediate result of extraction from vegetable material. It could cover even oils which may be the result of refining or cleavage of such oils so long as they are recognised as oils. And we have seen that the authoritative book "Bailey's Industrial Oil and Fat Products" recognises acid oils as oils. Item 12, in the circumstances, would be far more appropriate then the non-descript residuary Item 68. 18. In the result, I agree with my learned Brother Shri Syiem." As can be noticed from the concurring order of Shri G. Sankaran, he has clearly brought out as to how the CCCN does not cover within its purview products of refining of oils. Acid oils from refining falling under 15.10 ("Fatty acids; acid oils from refining; fatty alcohols"). These acid oils have a relatively high free acid content and are prepared by decomposing with mineral acid of the soap-stock and obtained during refining of crude oils. It has also been noted that the classification under CCCN would not pro ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
