Money credit for soap manufacture covers job-work processing of vegetable oil into fatty acid used in final soap production.

Vegetable non-essential oil processed on job-work basis into fatty acid remained within the money credit scheme under Notification No. 46/89 read with Rule 57K where the intermediate product was returned to the supplier or used in the assessee's own soap manufacture. The presence of an intermediate product did not break the statutory link to soap manufacture, because the notification covered vegetable oils, including those subjected to hydrogenation or hydrolysis, when used in making soap and also contemplated processing outside the factory. A narrow reading based on a separate exemption for fatty acid was rejected as inconsistent with the object of the scheme, and the credit benefit was held to be available.

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Issues: Whether the assessee, a soap manufacturer processing vegetable non-essential oil on job-work basis into fatty acid and using the resultant product in the manufacture of soap, was entitled to money credit under Notification No. 46/89 read with Rule 57K of the Central Excise Rules, 1944.

Analysis: The notification covered vegetable oils, whether or not subjected to hydrogenation or hydrolysis, when used in the manufacture of soap, and also contemplated processing outside the soap-manufacturing factory. The assessee's activity was not a mere independent processing activity divorced from soap manufacture; the processed material was either returned to the supplier or further used in the assessee's own manufacture of soap. The existence of an intermediate product did not defeat the scheme, and the department's reliance on the exemption of fatty acid under a different notification could not deny the benefit where the final use fell within the intended scope of the money credit scheme. The interpretation adopted by the lower authorities was held to be unduly narrow and inconsistent with the object of the notification.

Conclusion: The assessee was entitled to the money credit benefit and the denial of credit was unsustainable.

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