Mechanical separation of crude oil does not amount to manufacture; soya gum and recovered oil fall outside Chapter 15.07.

Soya gum and recovered oil obtained by decantation, filtration, or other mechanical separation of crude oil were not treated as manufactured goods because the process only removed impurities and residual oil already present in the crude input. No new product with a distinct character, use, or identity emerged, and the explanatory note to Chapter 15 supported the view that crude vegetable oil remains crude where only such separation methods are used. Chapter 15.07 was therefore inapplicable, and the revenue's demand and penalty did not survive.

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Issues: Whether soya gum and recovered oil emerging from storage and separation of crude oil by decantation, filtration, or mechanical separation amounted to manufacture and were classifiable as excisable goods under Chapter 15.07 of the Central Excise Tariff Act, 1985.

Analysis: The goods in question were found to be nothing more than impurities and residual oil already contained in the purchased crude oil. The separation process only removed settled impurities by mechanical means and did not bring into existence a new product with a distinct character, use, or identity. The explanatory note to Chapter 15 supported the view that crude vegetable oils remain crude where only decantation, centrifugation, or filtration is employed, and Chapter 15.07 was held inapplicable because the material was not a residue resulting from the kind of treatment contemplated by that heading.

Conclusion: Soya gum and recovered oil were not manufactured goods and were not classifiable under Chapter 15.07; the revenue's demand and penalty failed.

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