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Collector of C. Ex. Vs. Jayant Oil Products (P) Ltd. - Court Judgment

SooperKanoon Citation

Court

Customs Excise and Service Tax Appellate Tribunal CESTAT Delhi

Decided On

Reported in

(1995)(77)ELT360TriDel

Appellant

Collector of C. Ex.

Respondent

Jayant Oil Products (P) Ltd.

Excerpt:


.....castor oil at 360c. he considered the claim of the manufacturer, the cracking was nothing but heat treatment. he has described the process as under : "castor oil is taken into a closed vessel and is heated under vacuum so that dehydration is started. then catalyst is added to enhance the rate of dehydration when dehydration is completed the mass is discharged in cooling vessel where carbon and fuller earth are added to facilitate filtration and then filtered." he held that this process was not one of the processes which if applied to a vegetable non-essential oil, renders it ineligible for the benefit of notification. entry 7 of the notification provides exemption to vegetable non-essential oils other than processed vegetable oils. the explanation to the notification defines processed vegetable non-essential oil as such oil which had undergone, subsequent to its extraction as one or more of the following processes : 4. it is to be noted that the classification of the monomeric and polymeric oils under item 12 was not disputed before the assistant collector or collector (appeals). the department now seeks to classify the oils under tariff item 68 on the ground that the.....

Judgment:


1. The issue for decision in this appeal is the classification of dehydrated castor oil Monomeric and polymeric and their eligibility to Notification 69-C of 1984. The Collector of Central Excise (Appeals), Bombay had held that these products are classifiable under Tariff Item 12 of the erstwhile Central Excise Tariff and were not eligible for benefit of notification.

2. We have heard Shri V.C. Bhartiya, JDR for the department and Shri R.Nambirajan, advocate for the respondent.

3. In his order, the Collector (Appeals) had noted that the products are obtained by cracking castor oil at 360C. He considered the claim of the manufacturer, the cracking was nothing but heat treatment. He has described the process as under : "Castor oil is taken into a closed vessel and is heated under vacuum so that dehydration is started. Then catalyst is added to enhance the rate of dehydration when dehydration is completed the mass is discharged in cooling vessel where carbon and fuller earth are added to facilitate filtration and then filtered." He held that this process was not one of the processes which if applied to a vegetable non-essential oil, renders it ineligible for the benefit of notification. Entry 7 of the notification provides exemption to vegetable non-essential oils other than processed vegetable oils. The Explanation to the notification defines processed vegetable non-essential oil as such oil which had undergone, subsequent to its extraction as one or more of the following processes : 4. It is to be noted that the classification of the monomeric and polymeric oils under item 12 was not disputed before the Assistant Collector or Collector (Appeals). The Department now seeks to classify the oils under Tariff Item 68 on the ground that the cracking of the oil results in molecular change in the structure of the oil, so that it no longer retains its identify as castor oil and therefore will not be classifiable tinder Tariff Item 12. The appellant, however, has cited an evidence in support of this claim and the JDR stated that he had no such evidence. He merely reiterated the grounds in the memorandum of appeal.

5. On the contrary, Shri R. Nambirajan has cited technical literature in support of the respondent's claim. Bailey's Industrial Oil and Fat Products published by John Wiley & Sons at pages 735 and 736 states as follows : - "Chemically the dehydration of castor oil involves removal of the hydroxyl ground and a hydrogen from an adjacent carbon atom in the ricinoleic acid portion of the triglyceride.

In the catalytic method, castor oil is heated under a vacuum at a temperature in the range of 230-280C in the presence of a catalyst until water is no longer evolved. Solubility characteristics change during dehydration. The starting castor oil is soluble in methanol and insoluble in petroleum ether; as dehydration progresses the product becomes insoluble in alcohol and soluble in hydrocarbon solvents. As the hydroxyl groups are removed viscosity decreases and iodine value and refractive index increase. Changes in these analytical values are used to monitor and control the extent of dehydration and polymerization. The maximum iodine value occurs at or near the point of minimum viscosity; further heating leads to polymerization with a consequent drop in iodine value." It further says at page 735 that "By far the most important coatings use of castor oil is in the form of dehydrated castor oil (frequently abbreviated DCO)." It is clear from this that castor oil is dehydrated to enable it to be used for specific applications, and that such dehydration does not result in the oil losing identity as such assuming the identity of new and different product, in the light of this material total absence of anything to support the Department's contention, dehydrated oil would continue to be classifiable under Item 12 of the erstwhile Central Excise Tariff. This was in fact the ratio of the Supreme Court judgment in Collector of Central Excise v. Jayant Oil Mills Pvt. Ltd. 1989 (40) E.L.T. 287 (SC) in its judgment, the Supreme Court upheld the finding of this Tribunal that Hydrogenated rice bran oil would continue to be classifiable under Item 12 for the reason it continues to be vegetable non-essential oil after such hardening. The classification decided by the Assistant Collector would remain unaltered.

6. It would also follow that the finding of the Collector (Appeals) has eligibility of the oil for the benefit of the notification would have to be confirmed, he has correctly noted that castor oil has not been subjected to processing, since it has not been subjected to any process specified in the explanation of the notification. Since the explanation restricts the scope of the 'term' by specifying the processes in question, and castor oil that has not undergone any of these specified processes, cannot be considered to be a processed oil within the meaning of that notification. The benefit of the notification is therefore, available to it.

In the result, we dismiss the Department's appeal and confirm the order appealed against.

7. [Contra per: S.K. Bhatnagar, Vice President]. - With due respects to Hon'ble Member (T), my views and orders are as follows : 8. I observe that admittedly the product is not "castor oil" (simplicitor) but "Dehydrated Castor Oil" and a question arises as to whether those two are the same or different commodities.

9. (i) Castor oil itself is "A light-yellow to brownish viscous oil obtained from the seed beans of the castor plant, Ricinus communis.

Besides "its original use as a purgative in medicine, castor oil is one of the used industrial vegetable oils." (ii) When castor oil is chemically dehydrated by removal of hydroxyle groups its properties change as per the "Materials Handbook" by George S. Brady and Henry R. Clauser as well as per the Kirk Othmer's "Encyclopedia of Chemical Technology". Thus for example, according to both of them iodine value, acid value and saponification value change and so also viscosity and solubility, colour etc. etc. But what is even more important from our point of view is that it involves chemical modification according to Kirk Othmer which goes on to say: "oil serves as an industrial raw-material for the manufacture of a number of complex organic drivatives (20-21). The unit processes involved in converting castor oil to chemical compounds include dehydration, sulfonation----------, (iii) We will examine its implications as we go on but before that we take note of the fact that in the Order-in-Appeal it is mentioned that the appellants had stated before the Collector (Appeals) that the castor oil is subjected to "cracking" for producing dehydrated castor oil but argued that it is nothing but simple heating.

However, the fact is that cracking is a well known process of manufacture. It is not just ordinary heating but a process involving decomposition and molecular recombination of organic compounds, as would be evident from the following; 10. As per the MacGraw Hill's "Dictionary of Scientific and Technical Terms" cracking is: "A process that is used to reduce the molecular weight of hydrocarbons by breaking the molecular bonds by various thermal, catalytic, or hydrocracking methods." "This process involves de-composition and molecular re-combination of organic compounds-------." It cites as an example "conversion of alicyclic compound (cyclohexane) to aromatic compounds (benzenoid)." 12. In fact cracking of higher hydrocarbons breaks down the big moleculous and thus converts those of higher molecular weight into lighter ones. In other words by cracking new products are obtained; or to put it differently cracking leads to conversion of one type of products into another.

13. It has, however, been stated by the Learned Counsel before us that in the present case simply dehydration is involved and "in the catalytic method, castor oil is heated under a vacuum at a temperature in the range of 230-280C in the presence of a catalyst until water is no longer evolved." (As per the Bailey's Industrial Oil and Fat Products). So far so good; but the Learned Counsel has also emphasised that castor oil on being subjected to dehydration remains castor oil.

This to my mind is not merely over-simplification but incorrect.

14. First and foremost dehydration can and often does result into a new commodity. For example: (i) Liquid milk on dehydration gets converted into milk powder which is another commodity; (ii) Fresh grapes (fresh fruit) on gradual dehydration get converted into kishmish ( a dry fruit) which is another commodity.

Secondly, in the present case catalytic dehydration converts castor oil to and excellent drying oil called dehydrated castor oil according to Kirk Othmers encyclopedia of Chemical Technology.

Further Analyses of commercial dehydrated castor oil indicates that using sulphuric acid as the catalyst, about 30% of the linoleic acid double bonds are conjugated in the 9, 11position. (And sulfonated castor oil, also known as Turkey red oil represents one of the earliest chemical derivatives of castor oil); Solubility characteristics change during dehydration. As dehydration progresses the product becomes insoluble in alcohol and soluble in hydrocarbon solvents. As the hydroxyl groups are removed, viscosity decreases and iodine value and refractive index increase. Changes in these analytical values are used to monitor and control the extent of dehydration and polymerization." 15. This shows that during conversion of castor oil into DCO conjugation and even polymerization may take place. (And the appellants have referred to monomeric as well as polymeric forms).

16. All this goes to show that chemically dehydrated castor oil is not the same thing as castor oil; And significantly "Bailey's Industrial and Fat Products" (fourth edition) also mentions that: "DCO is now recognized as an individual drying oil with its own characteristic properties and advantages" (DCO is an abbreviation of dehydrated castor oil).

17. In so far as the case law is concerned the case of Tata Oil Mills -1986 (24) E.L.T. 290 relates to extra hardened rice bran oil prepared by hydrogena-tion. It may be mentioned that this order does not help the cause of the respondents as apart from the fact that it relates to a different product and a different process, the Tribunal has itself mentioned, inter alia, in para 21 of this order that "The broader question, therefore, whether in every case VNE oil which after extra hardening has different name, character and use would merit classification under the same item as VNE oil i.e. Tariff Item 12 should remain open." Hence each case has to be considered on its own merits and in the present case respondents have themselves produced the extract from the famous "Bailey's Industrial Oil And Fat Products" which as we have noted above shows that DCO is now recognised as an individual drying oil with its own characteristic properties and uses.

18. For the same reason the Hon'ble Supreme Court's judgment in the case of Jayant Oil Mills (P) Ltd. -1989 (40) E.L.T. 287 does not help the cause of the respondent. And the fact that in the present case the characteristic properties change and a new product emerges cannot be overlooked.

19. In so far as the Tribunal's order in the case of Jayant Oil Mills -1993 (67) E.L.T. 986 (Tribunal) is concerned it has again dealt with a different product namely dehydrogenated castor oil and not with dehydrated castor oil. Furthermore the technical literature mentioned above and the aspects discussed above do not appear to have been noticed no more classifiable under T.I. 12. And in the absence of any other heading to which it could be assigned, DCO would be classifiable under T.I. 68. As a consequence Notification 69/84 which covers only the vegetable oils classifiable under T.I. 12 was not applicable.

Further Notification 115/75 will also not apply because neither an oil mill operation nor a solvent extraction process is involved and there is nothing on record to show that it could be considered as a product of such an industry in the above facts and circumstances.

23. I have gone through the orders prepared by the Learned Member (T) and Learned Vice President.

24. In this appeal there is no dispute with regard to the classification of the item under Tariff Item No. 12 of the erstwhile Tariff. In that view of the matter, the issue for our consideration has to be confined with regard to the applicability of the notification in question. The Learned Member (T) has held that the dehydrated castor oil and conversion of the castor oil into dehydrated castor oil will not result into a new product and it will also not change the classification and, therefore, benefit is available to the item in question. In this regard the extract from the Bailey's Industrial Oil and Fat Products has been relied upon. Besides, the judgment of the Hon'ble Supreme Court in the case of Collector of Central Excise v.Jayant Oil Mills, as reported in 1993 (67) E.L.T. 986 has also been referred to. On the other hand, the Learned Vice President has held that the processes involved in dehydration of castor oil results in change of the product and brings into existence a new product which is classifiable under Tariff Item No. 68 and in that view of the matter, the notification in question is not extendable to the product in question.

25. I am of the considered opinion, that the process of dehydration does not result in a different and separate commercial commodity. There is no evidence placed about it being traded as a separate goods and known as a separate product in the market. In the CCE v. Jayant Oil Mills, as reported in 1993 (67) E.L.T. 986, the Tribunal took into consideration the ruling of the Hon'ble Supreme Court, which took a view that oil would remain oil if it retains its essential properties, and merely because it has been subjected to certain processes would not convert it into a different substance. Therefore, this aspect of the ratio is applicable to the present case. Mere dehydration would not result into a new and separate product and it would not go outside the category of castor oil. In that view of the matter, I agree with the finding of ld. Member (T) Shri Gowri Shankar and direct for dismissal of the appeal.Dated : 14-3-1995 Member (J)


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