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TMI Blog1996 (2) TMI 255X X X X Extracts X X X X X X X X Extracts X X X X ..... Tobacco Seed Oil which are "Processed Vegetable Non-essential Oils". They are covered under Chapter 15 of the Schedule to the Central Excise Tariff Act ,1985. 3. The Central Government through Notification No. 69/84-C.E., dated 1-3-1984 as amended by Notification No. 148/85-C.E. dated 28.6-1985 and No. 78/86-C.E., dated 10-2-1986, granted full exemption from Central Excise duty in respect of "Processed Vegetable Non-essential Oils" if the same are used within the factory of production in the manufacture of finished product namely, vegetable products, pigments, colours, paints etc. on which duty of excise is leviable either in whole or in part under the Centrai Excises and Salt Act, 1944. 4. It is now an admitted fact that in the appellants' factory, "Processed Vegetable Non-essential Oils" are used within the factory in the manufacture of paints and varnishes which are liable to Central Excise duty. 4A. But the case of the Department is that the aforesaid "Processed Vegetable Non-essential Oils" were used in the appellants' factory for the manufacture of `Synthetic Resins' which were fully exempt from Central Excise duty and the benefit of the Notification No. 69 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herefore, the purported order of the Asstt. Collector stands being correct in law and appeal is rejected. Accordingly, the appeal is disposed of." 8. It is against this Order the present appeals are filed. 9. Ld. Consultant, Shri A.K. Bagchi contended before us that in the process of manufacture of the final products i.e. varnishes and paints, resin emerged, which was captively consumed by them for the manufacture of the final product. He stated that there was nothing in the Notification No. 69/84-C.E., dated 1-3-1984 that the input - "Processed Vegetable Non-essential Oils" should form an integral part of the finished product or that such inputs must go directly into the finished products. He contended that the benefit of the Notification would be available even though in the process of manufacture for paints and varnishes starting from the processing of "Processed Vegetable Non-essential Oils" with other chemicals, solvents etc. resin emerged as intermediate stage product. It was his submission that since the "Processed Vegetable Non-essential Oil" was used in the manufacture of paints and varnishes they were entitled for the benefit of the Notification. He also cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , other than the purpose of manufacturing of paints and varnishes. During the process of manufacture of paints and varnishes from "Processed Vegetable Non-essential Oil" the intermediate product which is resin, emerges out. Under Notification No. 69/84-C.E., dated 1-3-1984, the benefit can be given to the vegetable non-essential oil if such processed oil is used within the factory of production in the manufacture of paints and varnishes. It is thus seen that the appellant company uses the "Processed Vegetable Non-essential Oil" for the purpose of manufacture of paints and varnishes and in the course of such process of manufacture, resin emerges out as an intermediate product. These intermediate products again undergo separate process to produce the finished/final products i.e. paints and varnishes. The term, intermediate product, is a relative concept and is to be understood in the context of the use of such products in the manufacture of final products. If the resins produced by the appellants are cleared from their factory where they are produced, then they are final products. But where such qoods are not cleared outside the factory and are captively consumed in the manufacture o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e during the course of manufacture of the final product and that such intermediate product is exempt from duty subject to the condition that the intermediate products are used within the factory of production in the manufacture of final product on which excise duty is leviable. This specific provision has been issued referring to the exemption that may be available to an intermediate product. An exemption becomes necessary only in respect of a final product otherwise dutiable and not a purely intermediate product occurring in the reaction chamber in the course of manufacture. The intermediate products, in the context of Rule 57D(2), are those products which are used in the factory where they are produced in the manufacture of other final products. The decision of the Tribunal in Jenson & Nicholson is fully applicable to the present case the Modvat Scheme quite similar to the Credit Scheme under Rule 201/79. A decision under that rule has got sufficient relevance for a Modvat matter. The Collector (Appeals) has not considered the facts and submissions properly and hence, come to an erroneous conclusion by which the earlier decision of the Assistant Collector was set aside. An inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CET should form an integral part of the finished product, or that such inputs must go directly into the finished product - see Sirsilk Limited v. Collector of Central Excise, Hyderabad - 1988 (34) E.L.T. 399 (Tribunal). It was, therefore, held that the benefit of the notification would be available even though in the process of manufacture of plastic laminated sheets starting from the aforesaid chemicals, treated fabrics and treated paper emerged as intermediate stage products. We may also note the pronouncement of the Supreme Court, though with reference to another notification, that use of a specified raw material for the manufacture of a specified finished product need not be direct but could be through an intermediate stage when that stage is inevitable in the manufacturing process [see Tata Oil Mills Co. Ltd. v. Collector of Central Excise - 1989 (2) SCALE 313]. There is no dispute in the instant case that Melamine was used in the manufacture of M.F. resin which, in turn, was used in the manufacture of paints and varnishes. " 15. In the decision reported in 1988 (34) E.L.T. 399 (Tribunal) (supra) the Tribunal at para 5 held as follows : 5. The Order-in-original pas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tariff Item No. 15, it is entitled to exemption under clause (b) of the aforesaid notification. Firstly this contention was not urged before any of the authorities below. Secondly it may be noticed that the clarified oil is not used directly in the manufacture of soaps. From the clarified oil, the hardened oil is obtained and then the hardened oil is used in the manufacture of soaps. Hardened oil itself is a marketable commodity. It is open to the petitioner to sell it as hardened oil, without using it for manufacturing soaps. In such a situation it cannot be said that clarified oil is used in the manufacture of soaps. This is the view taken by the Bombay High Court in Indian Vegetable Products Limited v. Union of India and Others - 1980 (6) E.L.T. 704 and we agree with that view." 18. But that decision only stated that from the clarified oil, the hardened oil is obtained and then the hardened oil is used in the manufacture of soaps. Hardened oil itself is a marketable commodity and it is open to the petitioners to sell it as hardened oil, without using it for manufacturing soaps. Therefore, it was open to the petitioners in that case to sell the hardened oil. But in this cas ..... X X X X Extracts X X X X X X X X Extracts X X X X
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