Exemption denied for input oil where the finished hardened vegetable oil was already wholly exempt from duty.

Vegetable non-essential oil used to produce hardened vegetable oil could not claim exemption under Notification No. 33/63-Central Excise where the proviso denied relief if the finished excisable goods were themselves fully exempt or chargeable at nil rate. The hardened vegetable oil was treated by the manufacturers as the relevant finished excisable product under tariff item 13 and had already obtained a separate exemption. Because that finished product was wholly exempt, the oil used in its manufacture did not qualify for the claimed exemption, even though the hardened oil was later used in soap manufacture. Duty was therefore payable on the oil.

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Issues: Whether vegetable non-essential oil used in the manufacture of hardened vegetable oil classified as vegetable product under tariff item 13, and ultimately used in soap manufacture, qualified for exemption under Notification No. 33/63-Central Excise, or became liable to duty because the finished excisable goods were themselves fully exempt.

Analysis: The exemption under clause (b) of Notification No. 33/63-Central Excise applied where vegetable non-essential oil, after processing, was used in the manufacture of goods falling under tariff items 13, 14 or 15. The second proviso denied that exemption where the finished excisable goods produced by the manufacturer were themselves exempt from the whole of the duty or chargeable to nil rate. On the facts, the petitioners had themselves treated the hardened oil as a finished excisable product falling under tariff item 13 and had obtained exemption for that product under Notification No. CER-8(3)/56-Central Excise dated 14.01.1956. In that setting, the hardened oil, and not the later soap manufacture, was the relevant finished excisable goods for the proviso. Since that finished product was wholly exempt, the oil used to make it could not claim exemption under Notification No. 33/63-Central Excise.

Conclusion: The petitioners were not entitled to exemption on vegetable non-essential oil under Notification No. 33/63-Central Excise, and duty was payable.

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