TaxTMI 
TaxTMI 
1984 (10) TMI 233
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.... fall under Tariff Item 68 of the Central Excise Tariff. By letter dated 18-5-1982 the appellants claimed that the three products would be classifiable under Tariff Item 12 only and the reliance of the Superintendent upon the Notification No. 33/63-Central Excise, dated 1-3-1963 as amended was not proper. They enclosed with said letter the details of the process for manufacture of these three commodities and contended that they continued to be vegetable non-essential oil only in spite of this process. When they filed classification list for the said three items under Tariff Item 12 the Assistant Collector held adjudication and thereafter passed an order dated 27-6-1983 classifying these three commodities under Tariff Item 68. The appeal against the said order was rejected by the Collector of Central Excise (Appeals) under order dated 2-3-1984. This appeal is against the order dated 2-3-1984. 2. Sri G.S. Jetly, Advocate along with Shri Ajit Bhosme, Advocate, appeared for the appellants, the respondent being represented, by Shri V. Lakshmi Kumaran, S.D.R. 3. We have carefully considered the submissions of both sides. In the Tungabadra Industries case [1960 Vol. 11 STC....
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.... 1822 had referred to the decision of the Gujarat High Court reported in 1980 E.L.T. 435 as also a decision of the Govt. of India and had rendered its decision accordingly. In this decision of the Govt. of India the earlier decision of the Supreme Court in the Tungabadra Industries case is noted to have been considered but distinguished. In making the distinction the Govt. of India appeared to have held-(a) that if the Supreme Court judgment is made directly applicable to the Central Excises and Salt Act also then Tariff Item 13 would be rendered nugatory and (b) hardened oils with melting point above 450C would be recognised as a commodity distinct from vegetable oils. 6. But the above two distinctions sought to be made by the Govt. of India in construing the decision of the Supreme Court do not appear to be proper. Tariff Item 13 deals with vegetable products, meaning any vegetable oil which has, by hydrogenation, been hardened for human consumption. But if any non-edible oil continues to be non-edible even on hydrogenation it would not fall under Tariff Item 13 merely because of hydrogenation. Therefore, the observation, that if the decision of the Supreme Court is to be....
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....he Tungabhadra Industries case wherein, for various reasons given, it had been held that in spite of hydrogenation and chemical changes taking place the groundnut oil continued to be oil only, though in a semi-solid form. 10. Another contention of Shri Lakshmi Kumaran was that edible VNE oils falling under T.I. 12 would pass into T.I. 13 when hydrogenation takes place but that when a further process of hardening also takes place the commodity would move out of T.I. 13 but not revert back to T.I. 12 and would have to be placed under T.I. 68. He said that in the same manner in respect of the three hardened oils in question also they will have to be classified under T.I. 68. But T.I. 12 covers VNE oils of all sorts. It is only such varieties thereof as would be edible even when hydrogenated that would fall under T.I. 13. This is not for the reason that they would on hydrogenation cease to be VNE oils, but because T.I. 13 has been specifically provided for such hydrogenated vegetable oils as vegetable products. Therefore, even with reference to the edible variety if a further hardening takes place making it non-edible, it would not appear to be correct to contend that thereupon....
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....ying hardened oils under T.I. 12. But Shri Jetley points out that the order of the Assistant Collector is not merely on the basis of this Tribunal's judgment but an independently reasoned order, though at the end reference is made to the order of the Tribunal also. But Shri Lakshmi Kumaran contends that the said order of the Assistant Collector should not be taken as an acceptance by the department of the conclusions of the Tribunal in the two orders under which they had classified hardened technical oils under T.I. 12 and no conclusion should be drawn in the present case on the basis of the order of the Assistant Collector. In so far as the order is that of the Assistant Collector we do not place any reliance on the reasonings in the said order for arriving at any conclusion in the present instance. 13. But on a careful consideration of the submissions of both sides we hold, for all the reasons mentioned earlier, that the three hardened oils concerned in this case undoubtedly fall under T.I. 12 only and cannot be relegated to T.I. 68. We do not feel that there is any need to refer this matter to a Special Bench of more than three Members as suggested by Shri Lakshmi Kumara....
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.... having jurisdiction over the area in which he carries on his business, be registered as a manufacturer of groundnut oil and cake. (2) Every such registered manufacturer of groundnut oil will be entitled to a deduction under clause (k) of sub-rule (1) of rule 5 equal to the value of the groundnut and/or kernel, purchased by him and converted into oil and cake if he has paid the tax to the State or such purchases : Provided that the amount for which the oil is sold is included in his net turnover." 3. The Counsel then read a few other paragraphs to show that this decision was not relevant for the purpose of the case we have before us since he said the Supreme Court was dealing only with a factory which produced vegetable product from groundnut oil. There is no case here of an oil hardened till it became unfit for human consumption, but only a decision whether the edible vegetable product was classifiable as an oil for the limited purposes of that Act. He argued that the latest order of the Tribunal (Order No. 366/84-C) did not take into account the decision of the Tribunal in M/s. Vegetable Oils Limited, Bombay, Order No. 183/1983-C in which the Tribunal decided t....
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....ook that will support the argument that the chemical reaction is of such a nature that the oil is no longer an oil. Unsaturated oils are many kinds of oils that are hydrogenated, after which they become saturated. But this does not change, in any way, the "oil" character : they remain oils in their behavior, structure and use. It would be easy to mistake the chemical reaction in hydrogenation as resulting in a different product. It is not so. A chemical reaction that takes place here is only designed to achieve a certain physical characteristic, viz., to raise the melting point. Even though the oil after hydrogenation becomes relatively saturated, it remains an oil in all characteristics and there is nothing to distinguish the two except the saturation. 7. The iodine value that the learned Counsel for the department thinks makes such a difference, in fact, does not have the role he thinks it plays. The iodine value of an oil only refers to the ability of an oil to absorb the element iodine. After hydrogenation an oil's ability to absorb iodine decreases; but this does not make any difference to its nature as an oil. Here it is useful to note that different liquid oils have ....
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....ified easily by application of heat, some more easily than others, but all of them can be rendered `liquid'. All solid fats like ghee, vanaspati, margarine, butter, lard, are solid at ordinary temperature but are liquid in summer. If the department says that the physical quality of being a solid makes all the difference, then, it should be also logical and say that when vanaspati is liquid in summer it should be assessed under item 12 because it is not hard or hardened. It would be an anachronism to speak of a liquid solid, called vanaspati, in summer. Both the trade and the department accept vanaspati under item 13 in summer even though it is liquid then, at any rate, in most parts of India. There is a fallacy in thinking that the solid nature of vanaspati or the solid tallow makes a different substance from the oil from which it is made. It is not a different product but the very same product of the same oil with all the characteristics of an oil. 11. We have on the authority of Hawley's The Condensed Chemical Dictionary that `there is no chemical difference between the fat and oil, the only distinction being the fats are solid at room temperature and the oils are liquid'....
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.... for the department tried to distinguish it, even while he professed he did not wish to distinguish it, by saying that it was a decision only for the purpose of a Sales Tax Act and concerned two substances both of which were used for cooking. As there was no consideration of a super hardened technical oil, the Supreme Court did not have this substance in mind. In saying so he is doing exactly what he said should not be done when the Gujarat High Court's decision in the Navasari Products decision was distinguished by saying that the Court had only item 13 and item 68 before it. But in distinguishing the Tungabhadra case, the learned Counsel for the department assumes that Supreme Court did not know that an oil can be hardened so much that it is no longer fit for human consumption. He said that the existence of item 12 should be assumed to be known to the Gujarat High Court in Navasari case while for his own argument, he assumes that the Supreme Court did not know that an oil can be hardened to 45oC rendering it unfit for human consumption. I am not prepared to make that assumption. I am only prepared to say that in Tungabhadra case, the Supreme Court had two products before it, a li....
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....said the meaning to be given to it would be : "any of various substances that typically are unctuous, viscous, combustible liquids or solids easily liquefiable on warming and are not miscible with water but are soluble in either, naphtha, and often alcohol and other organic solvents, that leave a greasy not necessarily permanent stain (as on paper or cloth), that may be of animal, vegetable, mineral, or synthetic origin, and that are used according to their types chiefly as lubricants, fuels and illuminants, as food, in soap and candles, and in perfumes and flavouring material." All the ingredients of this meaning are fully satisfied in the case of hydrogenated vegetable oil. We may specially point out that even solids easily liquefiable on warming fall within the meaning given by Webster. Now the various processes, namely, neutralization, bleaching, deodorisation, hardening and hydrogenation to which oil is subjected for being converted into vanaspati leave its basic characteristics untouched i.e. it remains a cooking medium with vegetable fat as its main ingredient. Neutralisation, bleaching and deodorisation are merely refining processes so that the colour, the odour and f....
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....t it would be a misnomer to call it oil as understood in ordinary parlance. The word `oil' was not defined in the Act and, therefore, its dictionary meaning might well be pressed into service. After considering the dictionary meaning in Webster's Third New International Dictionary the Court reproduced the definition as we have seen above. The meaning of the word connotes that the substance is unctuous, viscous and many other things. There is nothing about oil being a liquid or a solid. And everybody knows that the viscosity of ghee varies with the weather because of the rise in the temperature in summer and its fall in December and January. 17. It would be tempting to distinguish this judgment on the ground that it was given in a dispute that arose about whether a man could said to be employed in an oil mill when he works in a vanaspati factory and, therefore, would not have application to a taxation dispute like the one we have here under the Central Excise Act. I think that, that would be a narrow and uninformed opinion. The paragraph reproduced above can easily apply to a dispute under Central Excise Act. After an oil hardened by hydrogenation is the subject of dispute b....
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....ened technical oil can be assessed under item 12 or item 68. The question we have to ask ourselves is whether item 68 is more suitable for the hardened technical oil than item 12. Item 12 covers : "Vegetable non-essential oils - all sorts, in or in relation to the manufacture of which any process is ordinarily carried on with the aid of power." 21. The department says that this is unsuitable for hardened technical oil and that item 68 is more suitable. This item covers : "all other goods not elsewhere specified". 22. These are the choices before us. Though the department says that hardened technical oil, because of the hydrogenation, has become `all other goods not elsewhere specified', my opinion is that it has not become `all other goods not elsewhere specified' but that it remains a `vegetable non-essential oil' in spite of its hydrogenation. I think it is more scientific and more reasonable and more suitable, knowing the nature of the product, to say that the hardened technical oil is a vegetable non-essential oil. It would be a different thing if the tariff carried a heading which is more specific for hardened technical oil than item 12 and item 68; for e....
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....ent to fall in item 12, just like the unneutralized oil. The logic of the department's case is difficult to comprehend. 25. The department advocates assessment of hardened technical oil under item 68. This item is only for goods not specified anywhere else. The department thinks that "all other goods not specified elsewhere" is more specific than "vegetable non-essential oils, all sorts". It ignores the basic rule of assessment that the more specific item should be preferred to one less so. It does not take much to see whether "goods not specified elsewhere" is more specific than "vegetable non-essential oils" for a product that has an oily nature, is produced from an oil, has the uses of an oil, and indeed looks like an oil, and is quite commonly accepted and spoken of as an oil, and is so related to oil, that it has little or no chemical difference from it. If hydrogenated oil can harden, so can many oils if subjected to heat loss (in winter or by chilling). If the department can see the virtue of specificity for hardened technical oil in item 68, I cannot. I see item 12 as more specific than item 68 for all hardened technical oil not fit for human consumption. 26.&ems....