Tribunal grants benefit of Notification No.115/75 CE to appellant in oil industry case

Godavari Edible Bran Oil Ltd. Versus Commissioner of Central Excise, Service Tax and Customs Visakhapatnam-II

Godavari Edible Bran Oil Ltd. Versus Commissioner of Central Excise, Service Tax and Customs Visakhapatnam-II - 2015 (325) E.L.T. 894 (Tri. - Bang.)

1. ISSUES PRESENTED and CONSIDERED

• Whether the appellant is liable to pay Central Excise duty on refined rice bran oil manufactured through job work by an amalgamated entity, given the procedural non-compliance under Notification No.214/86.
• Whether the appellant is entitled to exemption under Notification No.115/75 CE as amended, which exempts goods manufactured in factories classified as oil mill or solvent extraction industry, despite the manufacturing process being split between two physically separate factories before amalgamation.
• The applicability of Notification No.115/75 CE to factories engaged solely in refining crude oil extracted by another factory.
• The relevance and applicability of precedent decisions interpreting the scope of Notification No.115/75 CE exemption.
• Whether the appellant could alternatively claim exemption under Notification No.89/95 CE for waste, parings, and scrap arising during manufacture of exempted goods.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Liability to pay Central Excise duty due to procedural non-compliance under Notification No.214/86

Legal framework and precedents: Notification No.214/86 prescribes specific procedures to be followed for availing exemption or for clearance of goods on job work basis. Non-compliance with such procedural requirements can lead to denial of exemption and imposition of duty.

Court's reasoning: The impugned order found that the prescribed procedure under Notification No.214/86 was not followed by the appellant and the amalgamated entity. Consequently, the Commissioner held both liable for duty payment.

Application of law to facts: The appellant's manufacturing process involved extraction of crude oil in one factory and refining in another (RRRL), initially separate entities but later amalgamated. The finished refined oil was cleared from the RRRL premises directly to customers. The procedural lapse related to failure to comply with Notification No.214/86 requirements for job work clearance.

Treatment of competing arguments: The appellant contested the duty liability by asserting entitlement to exemption under Notification No.115/75 CE, which would negate the duty demand despite procedural issues.

Conclusion: While procedural non-compliance was noted, the Court's ultimate decision on duty liability was influenced by the applicability of exemption under Notification No.115/75 CE, as analyzed below.

Issue 2: Entitlement to exemption under Notification No.115/75 CE as amended for goods manufactured in oil mill or solvent extraction industry

Legal framework and precedents: Notification No.115/75 CE exempts goods manufactured in factories classified as oil mill or solvent extraction industry. The plain language of the notification covers goods manufactured in such factories without additional restrictions on integrated manufacturing processes.

The Supreme Court in a leading decision interpreted the notification to mean that goods manufactured in a solvent extraction plant are entitled to exemption, regardless of whether the plant is part of a larger integrated facility or separate from other related units.

Tribunal decisions in Prakash Solvex and A.P. Solvex Ltd. further clarified that the exemption applies even if the manufacturing activity is limited to refining crude oil purchased or obtained from another factory, as long as the factory qualifies as oil mill or solvent extraction industry.

Court's interpretation and reasoning: The Court emphasized the plain wording of Notification No.115/75 CE, which exempts goods manufactured in factories covered by the specified industries. It rejected a narrow interpretation requiring the entire manufacturing process to be conducted within a single factory for exemption eligibility.

The Court noted that the appellant's factories, before amalgamation, were separate entities-one extracting crude oil, the other refining it. After amalgamation, both units belonged to the same appellant. The Court held that both pre- and post-amalgamation scenarios fall within the scope of the notification.

Key evidence and findings: The appellant's manufacturing activities involved extraction and refining of rice bran oil in separate factories, with RRRL performing refining job work under supervision and control of the appellant. The finished product was cleared directly to customers from RRRL premises.

Application of law to facts: Based on the precedents and the plain language of the notification, the Court found that the appellant's manufacturing units qualify as oil mill and solvent extraction industry factories. Thus, the refined rice bran oil is exempt from duty under Notification No.115/75 CE.

Treatment of competing arguments: The Revenue argued that exemption should be denied because the two manufacturing units were separate factories and the refining activity was distinct from extraction, thus not qualifying for exemption under the notification. The Court rejected this argument, relying on authoritative precedents and the plain language of the notification.

Conclusion: The appellant is entitled to exemption under Notification No.115/75 CE as amended, both before and after amalgamation, irrespective of the manufacturing process being split between two factories.

Issue 3: Applicability of exemption to factories engaged solely in refining crude oil

Legal framework and precedents: The Tribunal in Prakash Solvex and A.P. Solvex Ltd. held that factories engaged only in refining crude oil also qualify as oil mill or solvent extraction industry factories for purposes of Notification No.115/75 CE exemption.

Court's interpretation and reasoning: The Court reiterated that the notification does not restrict exemption to factories engaged in extraction alone; refining activities are covered within the ambit of the oil mill and solvent extraction industry.

Application of law to facts: Since RRRL performed refining on job work basis and was later amalgamated with the appellant, the refining factory qualifies for exemption under the notification.

Conclusion: Factories solely engaged in refining crude oil are entitled to exemption under Notification No.115/75 CE, supporting the appellant's claim.

Issue 4: Relevance of precedent decisions interpreting Notification No.115/75 CE exemption

Legal framework and precedents: The Supreme Court and Tribunal decisions provide authoritative interpretation of Notification No.115/75 CE, establishing that:

• The exemption applies to goods manufactured in factories classified as oil mill or solvent extraction industry.
• The exemption is not negated by the separation of extraction and refining activities into different factories.
• Refining-only factories are covered within the notification's scope.

Court's reasoning: The Court relied on these precedents to resolve the dispute in favor of the appellant, emphasizing the plain language of the notification and the consistent judicial interpretation supporting a broad exemption scope.

Conclusion: The precedents decisively support the appellant's entitlement to exemption under Notification No.115/75 CE.

Issue 5: Alternative claim under Notification No.89/95 CE for waste, parings, and scrap

Legal framework: Notification No.89/95 CE exempts waste, parings, and scrap arising during the manufacture of exempted goods.

Court's reasoning: The Court observed that since the main issue was decided in favor of the appellant on merits, it was unnecessary to examine the alternative claim under Notification No.89/95 CE.

Conclusion: No determination was made on the alternative exemption claim due to the resolution of the primary exemption issue.