TMI Blog1989 (8) TMI 79X X X X Extracts X X X X X X X X Extracts X X X X ..... 4-1305 of 1987 - - - Dated:- 14-8-1989 - S. Ranganathan and T.K. Thommen, JJ. Soli J. Sorabjee, Senior Advocate (Ravinder Narain, A.N. Haksar, P.K. Ram and D.N. Misra, Advocates, with him), for the appellant. A.K. Ganguli, Senior Advocate (P. Parameshwaran, A. Subba Rao and Ms. Sushma Suri, Advocates, with him), for the respondent. [Judgment per: Ranganathan, J.]. - These are appeals under Section 35L of the Central Excises and Salt Act, 1944 (hereinafter referred to as 'the Act'). The appellant, Tata Oil Mills Company Limited, is engaged in the manufacture of various varieties of soaps. The present dispute has arisen in relation to its factory at Ghaziabad in the State of Uttar Pradesh. 2. The dispute pertains to the eligibility of the appellant to the concession granted by the Central Government under Rule 8(1) of the Central Excise Rules, 1944 through notification No. 46 of 1972, subsequently amended by notification Nos. 153 of 1973 dated 24-7-1973, and 25 of 1975 dated 1-3-1975. Even though there are three notifications, the point is common and both the appeals involve the same question. 3. The question arises this way. Ad valorem excise duty at 20% is levied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... digenous rice bran oil and other oils. This meant that rice bran oil must form part of the process of manufacture of soap in the factory which is manufacturing the soap and claiming the exemption. The notification will not apply merely because the soap is manufactured out of rice bran fatty acid which in turn has been obtained by hydrolysis of rice bran oil in a different factory (may be one belonging to the same assessee which is a separate unit of manufacture for purposes of excise duty). 5. The Tribunal confirmed this view. It considered the terms of Notification No. 25/75 and held: "We observe that the concession given under Notification No. 25/75 is apparently with a view to encourage the use of rice bran oil in the soap industry. The point for consideration is whether the rice bran oil for the purpose of benefit of notification should be brought into the factory of manufacturer as such and then subjected to various pre-treatments required for its use in the soap industry or whether the same could be treated outside the factory and the necessary fraction of the rice bran oil namely rice bran fatty acid required for the manufacture of soap alone could be brought into the fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... turer's factory. Holding that the notification did not envisage the use of rice bran fatty acid and it is the rice bran oil which is required to be used in the manufacture of soap for concessional assessment purposes, the Tribunal dismissed the appeals of the assessee. Hence these appeals. 6. We are of opinion that the view taken by the Excise Authorities as well as by the Tribunal proceeds upon too narrow an interpretation of the notification. It is true, as Mr. Ganguli contended, that an assessee claiming relief under an exemption provision in a taxing statute has to show that he comes within the language of the exemption. But, in trying to understand the language used by an exemption notification, one should keep in mind two important aspects : (a) the object and purposes of the exemption and (b) the nature of the actual process involved in the manufacture of the commodity in relation to which exemption is granted. So far as (b) is concerned, it is common ground before us that rice bran oil as such is not directly used in the manufacture of soap. Rice bran oil contains glycerol and other impurities which have to be removed by a process of hydrolysis or hydrogenation and it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bran fatty acid). The assessee will then be clearly entitled to the exemption under the notification inasmuch as the hydrogenated rice bran oil does not cease to be rice bran oil. (See in this connection : Tungabhadra Industries Ltd. v. C.T.O -1961-2 S.C.R. 14 and Collector of Central Excise v. Jayant Oil Mills etc. (CA 729 of 1983 and 2479 of 1987, decided by this Court on 31-3-1989). Since reported in - 1989 (40) E.L.T. 287 (S.C.). The answer cannot be different where rice bran oil is treated to yield rice bran fatty acid before soap is manufactured even if it be assumed that, unlike hydrogenated oil the fatty acid is, commercially speaking, a different commodity. We are, therefore, of opinion that, construing the notifications literally but reasonably in the light of the process of manufacture as explained by the Tribunal, the soap manufactured by the assessee is "soap made from indigenous rice bran oil" and is entitled to the exemption under the notifications to the extent permissible thereunder. 8. Reference was made, in the course of the arguments before us, to a tariff advice issued as early as July 1974 by the Ministry of Finance in relation to the notification of 1972. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In this connection it is emphasised that the exemption notification precludes any processing or pre-treatment, including hydrogenation in the manufacture of soap, except where such processes are incidental and ancillary to the manufacturing operations." 9. The Tribunal has pointed out that the notification refers to the percentage of rice bran oil consumption and that, unless such oil is directly used in the factory, it will not be possible to work back, from the weight of fatty acid used by the assessee, the weight of rice bran oil out of which such acid had been obtained. There are two answers to this objection. One is that, if what we have stated is the correct interpretation of the notification, the mere fact that there may be some difficulty in ascertaining the weight of oil, cannot be a justification to refuse to give effect to that interpretation. The second is that a practical solution to this difficulty has in fact been evolved and that, too, in the case of the same assessee. Our attention has been invited to a circular issued by the Assistant Collector, Ernakulam II dated 23-6-1977. This circular states that the matter had been considered pursuant to an appellate order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reatments, including hydrogenation, such treatment would not debar them from the rebate scheme inasmuch as such processing is essential in the process of manufacture of soap. As the notification in question permit the reabate subject to identification of the oil as such, had the manufacturer placed the matter before the concerned Collector pointing out his practical difficulties, the Collector would have advised for suitable documentation (if the existing documentations are not enough) for the receipt, processing, movement and accounting of the oils for the concession in question. In the circumstances, it is felt that the benefit of rebate cannot be denied to the manufacturers for want of prescribing a satisfactory procedure, especially, when it is contended by the manufacturers that they have opted for the rebate scheme, their factories are under excise control, they have sufficient documentary evidence about the receipt, processing, movement, incorporation/use in the manufacture of soap. If, as contended by the manufacturers, there is sufficient record maintained by them for excise purposes and the reasonable correlation is possible about the identity and use of such oils it wo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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