1986 (3) TMI 92 - AT - Central Excise

Tribunal Rules Extra Hardened Rice Bran Oil as Vegetable Oil, Overturning Collector's Order; Hydrogenation Not Altering Character.

TATA OIL MILLS CO. LTD. Versus COLLECTOR OF CENTRAL EXCISE, MADRAS

TATA OIL MILLS CO. LTD. Versus COLLECTOR OF CENTRAL EXCISE, MADRAS - 1986 (24) E.L.T. 290 (Tribunal) Issues Involved:1. Classification of extra hardened rice bran oil under Central Excise Tariff.2. Validity of the constitution of a Larger Special Bench.3. Admissibility of interveners in the proceedings.4. Applicability of Supreme Court judgments on hydrogenated oils.5. Relevance of High Court judgments on the classification of hardened oils.Detailed Analysis:1. Classification of Extra Hardened Rice Bran Oil:The primary issue was whether extra hardened rice bran oil should be classified under Item 12 (vegetable non-essential oils) or Item 68 (residuary item) of the Central Excise Tariff. The Tribunal examined the process of hydrogenation and its impact on the oil, noting that the oil becomes semi-solid and inedible, referred to as 'vegetable tallow' or 'industrial hard oil.' The appellants argued that despite hydrogenation, the oil remained essentially the same and should be classified under Item 12. They cited Supreme Court judgments in Tungabhadra Industries Ltd. v. Commercial Tax Officer and Champaklal H. Thakkar v. State of Gujarat, which held that hydrogenated oil remains oil. The Tribunal agreed, stating that the basic character of the oil did not change with hydrogenation and thus remained classifiable under Item 12.2. Validity of the Constitution of a Larger Special Bench:The appellants and respondents initially objected to the constitution of a Larger Special Bench, arguing there was no provision in the Act for such a bench. The Tribunal clarified that under the provisions then in force, a classification matter had to be decided by a bench of not less than three members, and there was nothing preventing the President from constituting a larger bench. The parties did not press this point further but requested their objection remain on record.3. Admissibility of Interveners:The Department objected to the interveners being heard, but the interveners argued they had a vital interest in the matter as the decision could affect their assessments. The Tribunal decided to hear the interveners in the interest of justice, acknowledging their potential impact from the decision.4. Applicability of Supreme Court Judgments:The appellants relied on Supreme Court judgments stating that hydrogenated oil remains oil. The Department argued these judgments were under different laws and related to different products (vanaspati). The Tribunal found the Supreme Court's reasoning applicable, noting that the basic character of the oil did not change with hydrogenation, regardless of the degree of hydrogenation or the melting point. The Tribunal held that the ratio of the Supreme Court judgment in the Tungabhadra case was binding and applicable to the present case.5. Relevance of High Court Judgments:The Tribunal considered three High Court judgments:- Gujarat High Court in Navasari case, which did not consider Item 12.- Bombay High Court in Indian Vegetable Product's case, where the petitioners did not argue for Item 12 initially.- Andhra Pradesh High Court in M/s. B. Rajindra Oil Mills and Refineries case, which dealt with clarified oil, not hardened oil.The Tribunal found these judgments did not assist in resolving the classification issue. It noted that previous Tribunal orders had followed the Supreme Court's reasoning in Tungabhadra case, supporting the classification under Item 12.Conclusion:The Tribunal concluded that extra hardened rice bran oil remains a vegetable oil classifiable under Item 12 of the Central Excise Tariff. The appeal was allowed, the Collector's order was set aside, and the Assistant Collector's original order was restored.