TMI Blog1978 (11) TMI 74X X X X Extracts X X X X X X X X Extracts X X X X ..... and the hydrogenation section. The process of manufacture, according to the petitioner, begins with the feeding of ground nut into the elevator, which forms a part of the crushing section of the plant and the end product is received at the filling point of the hydrogenation plant as a result of the continuous uninterrupted process. The petitioner has referred to the details of the manufacturing process in the petition and has stated that the oil expelled from the expeller is directly utilised without removal ar storage in the continuous process of manufacture of vanaspati. The petitioner has now filed along with an additionnal affidavit the graphical sketch of the vegetable oil refining and hydrogenation process plant. The correctness of this sketch has not been disputed on behalf of the respondent Union. There is no dispute that originally with effect from 1st March 1956 duty payable on vegetable non-essential oils, which was item 23 in the First Schedule to the Central Excises and Salt Act, 1944 hereinafter referred to as the Act, was payable at Rs. 70 per tonne. The Finance Act of 1957 raised the rate of duty on the vegetable non-essential oils to Rs. 112/- per tonne. Admittedl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ttedly this order was passed behind the back of the petitioner in whose favour a substantial benefit had accrued as a consequence of refund being ordered by the earlier order dated 27th March, 1963. 3. The petitioner took up the matter by a writ petition in the Punjab High Court challenging the order of cancellation of the earlier order. The matter was finally dealt with by the High Court of Delhi in Civil Writ No. 587-10/1963, and the order of the Secretary in the Ministry of Finance dated 24th April 1963 came to be quashed and the earlier order of refund was restored. The petitioner has placed on record a copy of the petition filed in the High Court. A pointed reference was made to this by Mr. Manchar appearing on behalf of the petitioner, in order to contend that even the Union of India had admitted the fact that the process of manufacture of hydrogenated vegetable oil was by a composite hydrogenated plant and that it was a continuous uninterrupted process. The relevant averments in that petition are as follows :- "For the purpose of manufacturing vanaspati the petitioners are operating a composite hydrogenation plant consisting of a hydrogenation and a crushing section. Gro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be disposed of and, therefore, the petitioner relying on the earlier decision of the Delhi High Court and the Government of India claimed that the amount of excise duty recovered in respect of the period 11th July, 1961 to 28th February, 1963 should be refunded. This letter is dated 7th August, 1973. A further request dated 2nd October, 1973 was made, consequent on which the matter was fixed for personal hearing by the Assistant Collector of Central Excise for 15th January, 1974. The petitioner seems to have been heard by the Assistant Collector on 21st January, 1974 but no decision having been taken by the Assistant Collector even as late as December, 1974, the petitioner filed the present petit,on in March 1974, then, it is not in dispute that to this date the authorities concerned have not given any decision on the claim of the petitioner for refund in respect of the period from 11th July, 1961 to 28th February 1963. 5. The main contention which is raised on behalf of the petitioner in this petition is that vegetable oil in respect of which duty has been collected was merely an intermediate product in the manufacture of hydrogenated vegetable oil or vanaspati and, therefore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made earlier in the return in the same paragraph that the petitioner is operating a composite hydrogenation plant consisting of crushing and hydrogenation sections. Possibly the case which is sought to be made out is that the pumping of the oil from the storage tank is a separate process. It has also been denied by the respondents that the oil expelled from the expellers is directly utilised without removal or storage in the said continuous process of manufacture of vanaspati. 6. Now the main stay of arguments of the petitioner is that the process of manufacture is a continuous un-interrupted process in a composite plant and before we proceed to consider the effect of rules 9 and 49 of the Rules it is necessary for us first to decide whether the averments made in the petition that the manufacture of hydrogenated vegetable oil is as a result of a composite un-interrupted process or it has not been controverted. We have referred in extense to the averments made by the petitioner not only in the present petition but also in the petition filed by it before the High Court of Punjab. We have also referred to the admission made on behalf of the Union of India in the return filed in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... crushing section of the plant. It has been vehemently contended by Mr. Palshikar and Mr. Deshpande, appearing on behalf of the Respondents, that the vegetable oil as such is an article which is in fact produced and that it is stored in a place from where it can be easily removed. The argument is that the vegetable oil is an item in the tariff liable to excise duty and that such an article having been produced it was liable to payment of excise duty. It is also contended that even if the plant is a composite plant, since vegetable oil is removed from one section of the plant to another, such transfer of oil would be covered by Rule 9 and would amount to removal from a place as contemplated by the provisions of Rule 9 of the Excise Duty Rules. 8. In order to decide these contentions it is necessary to refer to certain relevant provisions of the Act and the Rules. The term "excisable goods' is defined in Section 2(d) of the Act as meaning goods specified in the First Schedule as being subject to a duty of excise and includes salt. Vegetable non-essential oil is admittedly included in Item 13 of the First Schedule as it falls under the definition of "Vegetable product", as the item ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the factory premises or from the approved place of storage - (1) payment of duty shall not be required in respect of excisable goods made in factory until they are about to be issued out of the place or premises specified under Rule 9 or are about to be removed from a store room or other place of storage approved by the Collector under Rule 47." It is apparent on the wording of rule 9 that it operates as an injunction against removal of excisable goods from a place where they are produced, cured or manufactured from a place where or they are produced, cured or manufactured or any premises appurtenant thereto which may be specified by the Collector in this behalf, until the excise duty leviable thereon has been paid. Rule 9 by itself does not make any reference to the place or the manner at or in which the excise duty is to be paid, but it merely required that before the goods are removed excise duty should be paid at such place and in such manner as is prescribed under the rules or as the Collector may require. It also requires an application in the proper form to be presented before the excisable goods are removed and that the necessary permission of the proper officer on that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same place being the other part of the composite plant, and, therefore, according to the respondents, excise duty was payable. We shall deal with this contention little later. 9. Now so far as rule 49 is concerned it clearly indicates that notwithstanding that excisable goods are produced and the provisions of Section 3, which is a charging provision, has fastened itself on such goods, the excise duty shall not be required in respect of excisable goods made in factory until they are about to be issued out of the place or premises specified under rule 9 or are about to be removed from a store-room or other place of storage approved by the Collector under Rule 47. We are not concerned with the removal of excisable goods either from a store room or from a place of storage approved by the Collector under rule 47. Rule 49 does refer back to rule 9 in so far as we have to ascertain the place from where there must be removal for the purposes of payment of excise duty. Rule 49 itself does not indicate the place of removal. It refers to excisable goods made in a factory but when we have to determine the question as to when duty becomes payable in respect of goods which are excisable and w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er article in a composite process of manufacture should be treated as excisable goods even though such an article, if it was removed from the plant before it became a part of the final product would have become "excisable goods" A process of onward movement of a component for being converted into a final product is not, in our view, covered by the concept of removal contemplated by the provisions of rule 9 of the Rules. 10. The question as to whether the manufacture of a component part in an integrated composite process of manufacture amounts to removal or not fall for consideration before this Court in Petition No. 491 of 1964 decided on 30th April, 1970 (Nirlon Synthetic Fibres and Chemicals Limited v. Shri B.K. Audim, Assistant Collector and Others). The question there was whether a product called Polymer Chips which was a product obtained at an intermediate stage during the process of manufacture of nylon yarn from Caprolactam Monomer was liable to excise duty. The Court had found that the entire process of manufacture of nylon yarn was a continuous and integrated process operating under highly controlled conditions in a sealed unit blanketed with an inert gas to avoid exidat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 'Plastics, all sorts' nor within the expression 'Artificial or synthetic resins and plastic materials', and, therefore, do not attract any excise duty. The Court, however, took the view that the polymer chips were finished products or manufactured goods. Dealing with the provisions of rules 9, 47 and 49 and the question as to whether a continuous or integrated process of manufacture was contemplated by rule 9, the court made the following observations :- "In my view, it is difficult to accept the submission of Mr. Bhabha on the point of true interpretation of the phrase 'removal from the place or premises' of manufacture occurring in Rule 49 read with Rule 9 of the Excise Rules. Since there is ambiguity about the exact sense in which the expression 'place or premises' has been used in Rule 49 read with Rule 9 the marginal note of Rule 49 can be taken into consideration which clearly shows that the removal must be from the factory premises. But that apart, it is clear that there are several Rules which use the expressions plant, vessel, tubes or pipe in contradistinction with the expression 'place or premises' which fact clearly shows that whenever rule making authority wante ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by Rule 49 read with Rule 9 of the Excise Rules, the Division Bench observed as follows :- "Rule 9, which we have read earlier, in terms lays down that no excisable goods shall be removed from any place where they are produced or any specified premises appurtenant thereto, whether for consumption, export or manufacture of any other commodity in or outside such place until the excise duty leviable has been paid. The Rule thus contemplates the site of manufacture as the place from where removal has to take place whether for consumption, export or manufacture of any other commodity. It obviously makes no reference to the plant or equipment. But, where there are two distinct plants within the same factory premises removal can take place either outside the factory premises or within the factory premises if the product obtained by working of one plant is sent to another plant for obtaining another product. There can be no removal of a product within the plant itself so long as the product is in the process of manufacture. There can be removal only if the product goes out of one stream of production into another stream of production or if the product is issued out of or taken out or c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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