Full Judgment Text
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CASE NO.:
Appeal (civil) 2523-2529 of 2000
PETITIONER:
M/s Vinay Solvent Extraction Industries Pvt. Ltd.
RESPONDENT:
Commissioner of Central Excise, Gujarat
DATE OF JUDGMENT: 20/04/2005
BENCH:
S. N. Variava, Dr. AR. Lakshmanan & S. H. Kapadia
JUDGMENT:
J U D G M E N T
S. N. VARIAVA, J.
These Appeals are filed against an Order dated 18th November,
1999 of the Customs, Excise and Gold (Control) Appellate Tribunal
(CEGAT).
Briefly stated the facts are as follows.
On 26th of July 1988 one Vijay Oil Mill having its address at
Majevadi Gate, Junagadh, addressed a letter to the Superintendent of
Central Excise, Junagadh, wherein it was mentioned that they had
entered into a lease agreement with the Appellants. It was mentioned
that Vijay Oil Mill was supplying oil cakes to the factory of the
Appellants and that the Appellants, who are holding a valid Central
Excise Licence, would be undertaking manufacturing activities for and
on their behalf, i.e., on behalf of Vijay Oil Mill. The letter mentioned
that the Vijay Oil Mill was accordingly filing a declaration under
Notification No. 305/77 dated 5th November 1977. By the letter Vijay
Oil Mill applied for exemption from licencing control and for permitting
the Appellants to discharge all the excise liabilities and procedural
formalities on their behalf.
The declaration filed along with the letter is relevant and it reads
as follows:-
"FORM OF AUTHORISATION TO BE FILLED IN BY A
MANUFACTURER WHO GETS HIS GOODS
MANUFACTURED/FABRICATED FROM ANY OTHER PERSON
AND TO BE AGREED TO BY THE LATTER
From: VIJAY OIL MILL
Full Address: Outside Majevadi,
Gate, JUNAGADH-362001
Phone No. if any: 25347/25397
To,
The Superintendent of Central Excise,
Range JUNAGADH Division \026 Junagadh
A U T H O R I S A T I O N
I/We, Vijay Oil Mill, Outside Majevadi Gate, Junagadh
hereby authorize M/s. Vinay Solvent Extraction Industries
Private Limited of Sukhpur, Junagadh (holding Central
Excise licence in form L.4 No. JUN/VNEO/2/80 to
manufacture/fabricate on my/our behalf Refined Oil
(Excisable commodity) falling under Central Excise Tariff
Item No. 1503.10 and to comply on my/our behalf all the
procedural formalities under the Central Excises & Salt Act,
1944 and Rules made thereunder and also to furnish
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information relating to the price at which I/we sell the said
goods (excisable commodity) including complete
information in case of goods sold to or through related
persons in order to enable determination of value of the
said goods under section 4 of the said Act.
PLACE: JUNAGADH
DATE:
(Signature)
Manufacturer who gets his
goods manufactured from
any other person or his
authorized Agent.
I/We VINAY SOLVENT EXTRACTION INDUSTIRES PRIVATE
LIMITED of Sukhpur (JUNAGADH) holding Central Excise
licence in form L-4 No. JUN/VENO/2/80 at SUKHPUR
hereby accept the above authorization and agree to
discharge all liabilities under the Central Excises and Salt
Act, 1944 and Rules made thereunder in respect of the
said goods manufactured from time to time by me/us on
behalf of the above mentioned manufacturer.
PLACE: Sukhpur
DATE:
(Signature)
Actual Manufacturer or his
Authorised Agent."
(emphasis supplied)
It is thus to be seen that the letter and the declaration are under
Notification No. 305/77. This Notification permits a manufacturer,
who gets his goods manufactured from some other person, to
authorize that other persons i.e. the person who actually manufactures
the goods, to comply with the procedural formalities and discharge
liabilities under the Central Excises and Salt Act 1944. The declaration
set out hereinabove clearly indicates that the Appellants were the
manufacturers. The Appellants have accepted the authorization. They
thus acknowledge that they are the actual manufacturer.
It must be mentioned that the parties also entered into a Lease
Agreement which inter alia contained the following clauses:-
"1. Any type of oil cakes of your purchase and
production will be treated at the rate of Rs.500.00
per one Metric Ton of 1000 Kgs.
2. The rates including the unloading of raw
materials and the loading of the finished goods at
our costs.
3. You have to pay minimum charge if you are not
able to give us the sufficient raw materials to meet
outstanding expenses whatsoever accrued during
the year \026 on per year ending financial year.
4. Oils, other than solvent extracted oils, will be
charge for refining at Rs.700.00 per metric ton of
oil."
This Lease Agreement also indicates that the Appellants have
leased out the factory to Vijay Oil Mill, who would supply the oil cakes
to the Appellants and the Appellants would produce at the rate of
Rs.500/- per metric ton of 1000 Kgs. (if the oil was a solvent extracted
oil) and at the rate of Rs.700/- per metric ton (for other oils). The
rates include unloading of raw material and loading of finished goods
at the cost of the Appellants. Vijay Oil Mills was to pay a minimum
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charge, which was to meet all standing expenses.
The Appellants filed a classification list classifying the product
manufactured by them under Tariff Sub-Heading 1503.10 of the
Schedule to the Central Excise Tariff Act 1985. In the classification list
the Appellants claimed benefit of Notification No. 262/86-C.E. dated
24th April 1986.
Seven show-cause notices were issued to the Appellants on the
ground that they were not entitled to the benefit of the said
Notification as they had not produced certificates as required under
clause (iii) of the said Notification. The Appellants then produced
certificates from the Directorate of Vanaspati, Vegetable Oils and Fats
to the effect that vegetable oil manufactured by "Vijay Oil Mill" had
been manufactured from fixed vegetable oil extracted by solvent
method. The Assistant Collector of Central Excise dropped the show-
cause notices on the production of the said certificates. He, however,
imposed a penalty of Rs. 2,000/- for non-filing of declaration under
Notification No. 305/77-CE dated 5th November 1977.
Against the dropping of the proceedings, the Department filed an
Appeal to the Collector (Appeals). The Collector (Appeals) held that
the Appellants were not eligible for the exemption under Notification
No. 262/86-CE dated 24th April 1986.
Against this Order the Appellants filed an Appeal to the Tribunal.
There was a difference of opinion between the Technical Member and
the Judicial Member. The Judicial Member held that the Appellants
were not entitled to the benefit of the Notification. The Technical
Member held that the Appellants were entitled to the benefit of the
Notification. Because of the difference of opinion the matter was
referred to a third Member who agreed with the view of the Judicial
Member and held that the Appellants were not entitled to the benefit
of the said Notification. Accordingly, by virtue of the majority opinion,
the Tribunal dismissed the Appeal and confirmed the demands. Hence
these Appeals.
The question before this Court is whether the Appellants are
entitled to benefit of Notification No. 262/86-CE dated 24th April, 1986.
Before this question is considered, for sake of clarity, facts need to be
recapitulated briefly. As set out above, Vijay Oil Mills had filed a
declaration, which had been accepted by the Appellants, that the
Appellants were the actual manufacturers. The Department had
accepted this case. The Central Excise licence was held by the
Appellants. The Appellants were the assessee who filed the
classification list (as manufacturers) and claimed the benefit of the
Notification (as manufacturers).
It now becomes necessary to consider the Notification. It reads
as follows:-
"In exercise of the Powers conferred by sub-rule (1) of rule
8 of the Central Excise Rules, 1944, the Central
Government hereby exempts fixed vegetable oils falling
under sub-heading No.1503.10 of the Schedule to the
Central Excise Tariff Act, 1985 (5 of 1986) (hereinafter
referred to as the said processed fixed vegetable oils) from
the whole of the duty of excise leviable thereon which is
specified in the said Schedule, subject to the following
conditions, namely:-
(i) the said processed fixed vegetable oil has been
manufactured from fixed vegetable oils extracted
by the solvent extraction method;
(ii) the manufacturer shall maintain record regarding
manufacture of the said processed fixed vegetable
oils and their clearance in the manner specified by
the Assistant Collector of Central Excise;
(iii) the manufacturer shall within such period as the
Assistant Collector of Central Excise may allow in
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this behalf produce a certificate from an officer
not below the rank of a Deputy Director in the
Directorate of Vanaspathi, Vegetable Oils and Fats
to the effect that the said processed fixed
Vegetable oils have been manufactured from fixed
vegetable oils extracted by the solvent extraction
method; and
(iv) the manufacturer undertakes to pay on demand in
respect of such quantity of the said processed
fixed vegetable oils as is not proved to the
satisfaction of the Assistant Collector of Central
Excise to have been manufactured from fixed
vegetable oils extracted by solvent extraction
method an amount equal to the duty of excise
leviable thereon but for the exemption contained
herein."
A plain reading of this Notification shows that the exemption is
to the fixed vegetable oils falling under sub-heading 1503.10, provided
(a) it has been manufactured from fixed vegetable oils extracted by
the solvent extraction method; (b) the manufacturer maintains record
regarding manufacture of the said processed fixed vegetable oils and
their clearance and (c) the manufacturer produces a certificate from an
officer not below the rank of a Deputy Director in the Directorate of
Vanaspati, Vegetable Oils and Fats to the effect that the said
processed fixed vegetable oils have been manufactured from fixed
vegetable oils extracted by the solvent extraction method. As seen
above the Appellants are the manufacturers. They are maintaining the
record and clearing the goods. Under condition No. (iii), it is the
Appellants who have to produce the required certificate. The
certificate must necessarily show that the processed fixed vegetable
oils manufactured by the Appellants was manufactured from fixed
vegetable oils extracted by the solvent extraction method. To get
such a certificate the Appellants would have to be registered with the
Directorate of Vansapati, Vegetable Oils and Fats, which admittedly
the Appellants are not. Realizing that this condition could not be
fulfilled by them the Appellants produced certificates certifying that
Vijay Oil Mills had manufactured such oil. As the Appellants are
manufacturers such a certificate was of no help. Thus before all the
lower authorities including the Tribunal it was contended that Vijay Oil
Mills were the manufacturers. This was a case contrary to facts and
the authorization and declaration. This contention was not accepted
by the Collector who rightly held that Vijay Oil Mills were getting the
manufacturing done by engaging the Appellants as job workers.
It must be mentioned that even in the Appeal Memo it has been
contended that Vijay Oil Mills are the manufacturers. Initially Mr.
Lakshmikumaran argued on the footing that Vijay Oil Mills were the
manufacturers. However, when the correct facts were noted, with this
usual fairness, Mr. Lakshmikumaran admitted that the record depicted
that Vijay Oil Mills were not the manufacturers.
Mr. Lakshmikumaran has submitted that Condition No. (iii) only
requires a manufacturer, i.e. the Appellants, to produce a certificate to
the effect that the processed vegetable oil had been manufactured
from fixed vegetable oils extracted by the solvent extraction method.
He submitted that such certificates were produced by the Appellants.
He submitted that the Appellants were not disentitled merely because
the certificates mentioned that the fixed vegetable oils were
manufactured by Vijay Oil Mills. We see no substance in this
submission. The required certificate must necessarily show that the oil
manufactured by the manufacturer (in this case the Appellants) had
been manufactured from fixed vegetable oils extracted by the solvent
extraction method. The manufacturer producing a certificate that
some other party had manufactured processed oil from fixed vegetable
oils extracted by solvent extraction method is obviously not sufficient.
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Faced with this situation Mr. Lakshmikumaran submitted that
the Tribunal has given a categorical finding to the following effect:
"...... In the instant case, it is nobody’s
contention that Vinay Oil hired Vijay Oil to
manufacture on the former’s account. On the
contrary, the entire factory was leased to Vijay
Oil by an agreement which is on principal to
principal basis. Except for receiving the lease
fees, there is no other flow back of profits etc. to
Vinay Oil shown before me. Therefore clearly,
from the date of the lease, Vinay Oil ceases to
be the manufacturer and Vijay Oil becomes the
manufacturer under law. The undertaking given
to ACCE that Vinay Oil would undertake to follow
all excise procedures was misplaced in law as
there is no legal provision shown to me to
prescribe this. Hence, it has no value under this
Act etc."
He submitted that on this categorical finding the benefit of the
Notification could not have been denied. He submitted that in view of
this finding the majority opinion to the effect that the benefit of the
Notification was not available is required to be set aside.
On the other hand Mr. Doabia pointed out that confusion has
been purposely created by the Appellants. He submitted that the case
sought to be built up was contrary to the documents on record. He
submitted that the actual manufacturers were the Appellants. He
submitted that as they were the actual manufacturers a Certificate in
the name of Vijay Oil Mills would not entitle the Appellants to get the
benefit of the Notification.
We have considered the rival submissions. It is clear that
benefit of Notification No. 305/77-CE dated 5.11.1977 has been taken;
the authorization and declaration given as the Appellants are
manufacturing on job work basis for Vijay Oil Mill. Thus, the actual
manufacturer is the Appellant. It is the Appellant who filed the
classification list and cleared the goods. It was only in reply to the
show-cause notice that a contrary case was put up and confusion
sought to be created. If the Appellants are actual manufacturers they
can only get benefit of the Notification provided they have certificates
from the Deputy Director of Vanaspati, Vegetable Oils and Fats
showing that the vegetable oil produced by them has been
manufactured from fixed vegetable oils extracted by the solvent
extraction method. The Appellants do not have any such certificates.
Certificates showing that Vijay Oil Mills have processed fixed vegetable
oils are not sufficient. The Appellants were aware of this position.
They thus contented that it was Vijay Oil Mill who manufactured the
processed oil. Such a contention is rightly not accepted by the
Collector and even by the Judicial Member. Undoubtedly, the third
Member of the Tribunal appears to have accepted this case. However,
it has been correctly held that Vijay Oil Mills would not be entitled to
the benefit of the Notification as they do not have a licence under the
Central Excise Act and do not comply with any of the formalities under
the Central Excise Act. More importantly they are not paying any
excise duty. A party who admittedly is not paying excise duty cannot
claim exemption from duty.
Mr. Lakshmikumaran then submitted that as the facts were
confusing the matter should be remanded back to the Assessing
Officer so that correct facts could be ascertained. We are unable to
accept this submission. The Appellants have accepted the
authorization. They have shown themselves to be manufacturers. The
Appellants are complying with the formalities under the Central Excise
Act. The Appellants maintain the requisite records. The Appellants
clear the goods. Condition No.(ii) of the Notification has been
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complied with by the Appellants and not by Vijay Oil Mill. It is the
Appellants who had filed the classification list. It is the Appellants who
had claimed the benefit of the said Notification. It can hardly now lie
in the mouth of the Appellants to claim that Vijay Oil Mills were the
real manufacturers. Further, as stated above, even if Vijay Oil Mills
were the manufacturer they would not be entitled to the benefit of the
Notification as they hold no licence nor comply with formalities under
the Central Excise Act. They do not even pay excise duty. Thus no
question arises of Vijay Oil Mills claiming benefit of the said
Notification.
In this view of the matter, we see no reason to interfere. The
Appeals stand dismissed. There will, however, be no order as to costs.