Full Judgment
2. The appellants request for a decision on merits. We have heard Shri Chakraborty, learned DR and perused the records.
(1) whether the product "low FFA oil" is a waste product again used in the factory of production either in solvent extaction plant or fat splitting plant and hence not excisable or whether it is a result of manufacture and therefore excisable? (2) whether the entire quantity of production of low FFA oil is eligible for exemption under Notification 118/75 as consumed captively in the manufacture of rice bran oil? (3) whether Notification 115/75 granting exemption to the products manufactured in factories covered by oil mill and solvent extraction industry is available to the appellants' product? 4. Let us examine the manufacturing process of low FFA oil. The rice bran oil is manufactured by solvent extraction method. When rice bran oil is split, 85% crude rice bran fatty oil & some quantity of sweet water is obtained. The sweet water is used for making glycerine. The crude fatty acid is distilled to obtain distilled fatty acid and low FFA oil.
Thus, it is noticed that during the manufacture of distilled fatty acid (some of which is sold direct and some manufactured into stearic acid by hydrogenation) low FFA oil is obtained as a by-product. The Chemical Examiner opined that "the sample is other than rice bran oil, it will not be covered by any of the items from 1 to 67. It is seen that the low free fatty oil is obtained at the time of rice bran crude fatty acid. The details of the actual process adopted and how the low free fatty oil is obtained has not been stated. This may be obtained from the party. Since the sample under reference is other than starting raw material and it is obtained by a process of manufacture it may be considered as a new and different product. The possibility of its falling under Item 68 may be examined subject to the fulfilment of the conditions of the item". The low FFA oil is different from the starting raw material, its composition is different from rice bran oil and it is known by a different name and it is therefore properly classifiable under T.I. 68. The extended period of limitation has been rightly invoked in the light of suppression by the appellants in not filing classification lists for the product.
5. Regarding the applicability of Notification No. 118/75, we find that the Assistant Collector has extended the benefit to 22.737 MT issued to fat splitting plant for further splitting into fatty acid by mixing with some more quantity of crude acid, thus put to use in the factory of production. The Assistant Collector has held - "With respect to the contention of the assessees that a quantity of 507.078 was used in their solvent extraction plant it is not acceptable, as the low FFA oil was not used in the further manufacture in the solvent extraction plant. The assessees, as seen from the records, simply added the quantities of low FFA oil to the closing balance of rice bran oil produced in the solvent extraction plant in their accounts. To avail of the exemption from payment of duty under Notification 118/75, the goods falling under Tariff Item 68 should have been intended for use in the factory in which they are manufactured. In the instant issue, the goods viz. low FFA oil was not put to any use with regard to further manufacture. The assessees also could not prove that the goods viz., low FFA oil was put to any further use in the factory. Only entry with respect to receipt of low FFA oil was made in the rice bran oil account under column "other receipts" and simply added to the closing stock of rice bran oil. Further, low FFA oil is not the same as rice bran oil.
The rice bran oil is stored in storage tanks connected by pipe line and it is not understood how the low FFA oil was taken to the storage tank of rice bran oil. By making an entry of receipt in the rice bran oil account, it appears the low FFA oil which is altogether a new product was cleared in the name of rice bran oil which is exempted from duty under Notification 9/60 dated 20-2-1960. Under the above circumstances, it cannot be said that low FFA oil is intended for use in the factory in which they are manufactured, by making a simple entry of receipt in rice bran oil account, without any further manufacture of low FFA oil.
Thus, the assessees are not entitled to the benefit of Notification 118/75-C.E., dated 30-4-1975. With respect to the quantity of 45.041 M.T. alleged to have been issued for other purposes, it is ascertained that the said quantity was accounted for separately in the company's "pitch oil register" and no RG-1 is maintained for the same. In this case also it is ascertained no further process of low FFA oil was carried on or the same was mixed with any other goods and on the other hand the quantities of low FFA oil was simply added to the quantities of pitch oil and cleared without payment of duty in the name of pitch oil outside the factory. As discussed above, in the case of FFA oil removed to solvent extraction plant, in this case also as the quantity of 45.041 M.T. of low FFA oil was not put to any use at all in the factory of production, the assessees are not entitled for the benefit of provisions of Notification 118/75".
6. This detailed reasoning of the Assistant Collector has not been satisfactorily controverted by the appellants. Hence we see no reason to interfere with the findings on this aspect.
7. Turning now to the last issue namely eligibility to the benefit of exemption under Notification 115/75, we note that the notification exempts goods falling under T.I. 68 and manufactured in factories covered by any of the industries specified in the schedule annexed thereto from the whole of the duty of excise leviable thereon. Item 4 of the schedule appended to the notification covers "oil mill and solvent extraction industry". The appellants' product i.e. low FFA oil falls under T.I. 68 and is manufactured in a factory covered by the oil mill and solvent extraction industry and is therefore eligible for exemption under Notification 115/75.
8. In the result we hold that low FFA oil manufactured by the appellants falls for classification under T.I. 68 of the First Schedule to the Central Excises and Salt Act, 1944 and is exempt from payment of excise duty by virtue of Sri. No. 4 of the Table annexed to Notification 115/75.