Case: Collector of Central Excise Vs. Messrs Tata Oil Mills Company Limited

The respondent M/s Jayant Oil Mills Pvt. Ltd., Hyderabad, manufactures hydrogenated rice bran oil which was sold to industrial consumers. The said hydrogenated rice bran oil is used as raw material in the manufacture of soap. The respondents, M/s Jayant Oil Mills Pvt. Ltd. filed a classification list dated May 20, 1981 in respect of the said goods classifying the same under Tariff Item 12 for approval and claimed exemption under Notification No. 9/60 dated February 20, 1960. The Assistant Collector of Central Excise, Hyderabad III Division by an order dated June 16, 1981 held that the hydrogenated rice bran oil was classifiable under Tariff Item 68 of the Central Excise Tariff (hereinafter referred to as CET), because hydrogenated rice bran oil is solid at the ordinary temperature and therefore should be considered as fat and not as oil. The Assistant Collector observed that there was one opinion that the said goods could not fall under Tariff Item 12 as it was unfit for human consumption. The Assistant Collector observed that the said goods was new product after manufacture, having a distinct name, character and use and as such it fell under Tariff ItemThe respondent on the other hand maintained before the Assistant Collector that the said goods wasand still vegetableoil falling under Tariff ItemBeing dissatisfied with the order dated June 16 1981, the respondent appealed before the Appellate Collector of Central Excise, Madras, by an order dated November 30, 1981, the Appellate Collector held that hydrogenated rice bran oil is classifiable under Tariff Itemand therefore ordered for consequential relief to the respondent3. The order of the Appellate Collector holding that the said products are classifiable under Tariff Itemhad not been reviewed by the Central Government under Section 36 (2) of the Act. The Appellate Collector was therefore of the view that even after the superhardening or hydrogenation vegetable oil did not cease to be oil even if it became solid4. The Central Government, Ministry of Finance, Department of Revenue, being of the view that the order of the Appellate Collector was not proper, legal and correct, issued a show cause notice dated May 12, 1982 to the respondent. The Central Government informed the respondents in the show cause notice that it appeared to the government that the hydrogenation of rice bran oil is a process of manufacture which brings into existence a new product known as hydrogenated rice bran oil in commercial parlance having a distinct name, character and use and this end product would have been classified under Tariff Item 13 had it been fit for human consumption. It was further observed in the said show cause notice by the government that as the melting point of the hydrogenated rice bran oil is more than 45 degree Celsius it was of the nature ofvegetable product which was unfit for human consumption and since it was distinct from vegetablesoil it would prima facie be classifiable under the residuary Tariff ItemThe respondents were, therefore, called upon to show cause as to why the order of the Appellate Collector should not be set aside and that of the Assistant Collector restored6. The matter came up before the CEGAT. The CEGAT noted in its impugned order that the appeal was concluded by the judgment of the five member Bench of the Tribunal in the case of M/s Tata Oil Mills Co. Ltd. ((1986) 24 ELT 290), and held that the order dated November 30, 1981 of the Appellate Collector was correct and dismissed the appeal of the appellant

Reasoning: 19. Our attention was drawn to Encyclopaedia Britannica, 1968, Vol. 19 p. 302 where preparation of rice is indicated. It states as followsThe kernel of rice as it leaves the thresher is enclosed by the hull, or husk and is known as paddy or rough rice. Rough rice is used for seed and feed for livestock, but most of it is milled for human consumption by removing the hulls. Rice is a good energy food, and is consumed in vast quantities in the Orient. In the Western Hemisphere, however, rice is not the staple cereal food, except in certain Caribbean islands20. Our attention was also drawn to certain observations of the Tribunal in Vital & Vital Oil Pvt. Ltd. v. Collector of Central Excise, Bombay ((1985) 21 ELT 166 (New Delhi), where the Tribunal observed that the department advocates assessment of hardened technical oil under Tariff Item 68. This item is only for goods not specified anywhere else. According to department, "all other goods not specified elsewhere" is more specific than "vegetableoils, all sorts". But it has to be borne in mind that the basic rule of construction is that a more specific item should be preferred to one less so. It does not take much to see whether "goods not specified elsewhere" is more specified than "vegetableoils" 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 an an oil and is so related to oil, that it has a little or no chemical. If hydrogenated oil can harden, so can many oils if subjected to heat loss (in winter or by chilling). It appears to us, therefore, that Tariff Item 12 is more specified than Tariff Item 68, for all hardened technical oil not fit for human consumption and such would cover under this category21. In the aforesaid view of the matter, we are of the opinion that the Tribunal particularly emphasised that the hardened technical oil is the same thing as the oil from which it is made. It is clearly akin to the oil in homologue, a product of scientific modification but unaltered in its essential character. Therefore, in our opinion, the Tribunal was right in the conclusion it arrivedThe Tribunal, therefore, in our opinion, was right on a conspectus of the relevant factors in coming to the conclusion that edible rice branoil falling under Tariff Itemwould even aftercontinue to fall under Tariff Item 12 and not fall under Tariff Item 68 because it would be vegetableoils, all sorts, in or in relation to the manufacture of which any process is ordinarily carried on with the aid of power. In that view of the matter, it would not come within Tariff Item 68. The Tribunal, it appears to us, has considered the technical side of it, the manner of its production, and in view of the principle laid down by Tungabhadra Industries Ltd., case ((1961) 2 SCR 14 : AIR 1961 SC 412 : (1960) 11 STC 827 ), which in our opinion was essentially application to the facts of this case. The Tribunal, in our opinion, came to the correctThe Tribunal, therefore, in our opinion, was right on a conspectus of the relevant factors in coming to the conclusion that edible rice branoil falling under Tariff Itemd even aftere to fall under Tariff Item 12 and not fall under Tariff Item 68 because it would be vegetableoils, all sorts, in or in relation to the manufacture of which any process is ordinarily carried on with the aid of power. In that view of the matter, it would not come within Tariff Item 68. The Tribunal, it appears to us, has considered the technical side of it, the manner of its production, and in view of the principle laid down by Tungabhadra Industries Ltd., case ((1961) 2 SCR 14 : AIR 1961 SC 412 : (1960) 11 STC 827 ), which in our opinion was essentially application to the facts of this case. The Tribunal, in our opinion, came to the correct