TMI Blog1985 (6) TMI 31X X X X Extracts X X X X X X X X Extracts X X X X ..... ners classified vegetable tallow under tariff item 13 of the first Schedule to the Central Excises and Salt Act. They relied upon an exemption notification being Notification No. CER-8 (3)/56, dated 14th March, 1956 under which vegetable product is exempted from the payment of excise duty leviable thereon, provided that the vegetable product is intended for use, inter alia, in the manufacture of soaps. In view of this exemption notification the petitioners were permitted to clear vegetable tallow without payment of any excise duty. 3. The petitioners have thereafter received five show cause notices asking the petitioners to show cause why excise duty should not be levied on vegetable non-essential oils manufactured by them. The first show cause notice dated 15/19-6-1972 deals with clearances from 9-10-1972. The next show cause notice dated 3-11-1972 deals with clearances from 1-6-1972 to 30-9-1972. The show cause notice dated 24/27-8-1973 deals with clearances between 1-10-1972 and 30-6-1973. The show cause notice 21-1-1974 deals with clearances between 1-7-1973 and 31-12-1974 while the last show cause notice dated 11-7-1974 deals with clearances between 1-1-1973 and 31-5-1974. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amended by Notification No. 50/63-Central Excise dated the 7th March, 1963, No. 14/64-Central Excise, dated the 15th February 1964, No. 110/65-Central Excise dated the 16th July, 1965 and No. 181/71-Central Excise, dated the 9th October, 1971, the following vegetable non-essential oils, falling under this Item are exempt from the payment of the whole of the excise duty leviable thereon ; (a) all sorts of vegetable non-essential oils, other than processed vegetable non-essential oils ; (b) Vegetable non-essential oil, whether produced in the factory of production of the excisable goods specified below or elsewhere, if used after it is processed in the manufacture of (i) goods falling under Item Nos. 13, 14 and 15 of the First Schedule to the Central Excises and Salt Act, 1944 ; and (ii) artificial or synthetic resins falling under Item No. 15A of the said Schedule : Provided that, in respect of the vegetable non-essential oil produced elsewhere than in the factory of production of the said excisable goods, the procedure set out in rule 56A of the Central Excise Rules, 1944, is followed : Provided further that no such exemption shall be allowed in respect of vegetable n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ened oil manufactured by them is a vegetable product falling under Tariff Item 13. It is, therefore, not now open to them to contend that the hardened oil produced by them is not classifiable as vegetable product under Tariff Item 13. We have, therefore, to proceed on the basis that the ultimate product manufactured by the petitioners is a vegetable product falling under Tariff Item 13. 10. It is the contention of the petitioners that the vegetable non-essential oil manufactured by them is ultimately used for the manufacture of soap. Soap falls under Tariff Item 15 of the First Schedule to the Central Excises and Salt Act, 1944. The petitioners, therefore, contend that in view of the exemption Notification No. 33/63 vegetable non-essential oil manufactured by them is exempt from the payment of the whole of the excise duty leviable on it. This contention requires to be examined in the light of the provisions of the exemption Notification No. 33/63. Under clause (b) of the exemption Notification vegetable non-essential oil, if it is used after it is processed, for the manufacture of goods falling under tariff Items 13, 14 and 15, is exempt from payment of the whole of the excise du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e manufactured, the exemption would still be available. In other words, it is open to a manufacturer of vegetable non-essential oil to sell it to somebody else who will use it for the manufacture of goods falling under Items 13, 14 and 15. The manufacturer of vegetable non-essential oil does not himself have to utilise this oil for the manufacture of goods falling under Items 13, 14 and 15. It is in this context that the second proviso to the exemption notification refers to the use of vegetable non-essential oil in the manufacture of finished excisable goods. "Finished excisable goods" have a reference to sub-clauses (i) and (ii) of clause (b) of the exemption notification. In other words, the finished excisable goods refer to goods falling under Items 13, 14 and 15 which are ultimately manufactured from vegetable non-essential oil. If this finished product falling under items 13, 14 and 15 is itself exempt from the whole of the duty of excise then vegetable non-esssential oil used for its manufacture will not get the exemption from the payment of the whole of the excise duty under Notification No. 33/63. In other words, vegetable non-essential oil is exempt from excise duty if it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the manufacture of which vegetable non-essential oil should be used. It is, therefore, not necessary to consider whether the hardened oil manufactured by the petitioners is an intermediate product in the manufacture of soap or not. If this product falls under Tariff Item 13 it must be treated as finished excisable goods for the purpose of the second proviso to the exemption notification. 15. In the present case, the petitioners have themselves treated the product manufactured by them as excisable goods falling under Tariff Item No. 13. We cannot, therefore, examine whether the hardened oil manufactured by the petitioners in fact falls under Tariff Item No. 13 or not. In these circumstances, the petitioners are governed by the second proviso to the exemption Notification No. 33/63. Since the hardened oil is exempt from the whole of the duty of excise, the petitioners will have to pay excise duty on vegetable non-essential oil for the period in question. 16. It is also submitted by the petitioners that there are other manufacturers who manufacture vegetable non-essential oil who thereafter convert vegetable non-essential oil into hardened oil and use it for the manufacture of soa ..... 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