Liberty Oil Mills and Another vs Union of India (UOI) and Others

S.P. Bharucha, J.—Between 1980 and 1981 the petitioners imported 11 consignments of unprocessed palm kernel oil and 12 consignments of unprocessed crude coconut oil. They paid Rs.7,18,957.11 as additional customs duty in respect of the said import.

The said oils are vegetable non-essential oils. They fall under item 12 of the Central Excise Tariff and the rate of excise duty is Rs.100/- per M.T. There is a special duty thereon at the rate of Rs.5/- per M.T. On 4th September, 1981 the Superintendent, Central Excise, Bombay, informed the petitioners that oils of the nature they had imported had been exempted from payment of the whole of the central excise duty thereon by reason of an exemption notification dated 1st March, 1963. The petitioners thereupon sought refund of the amount that had been paid as additional customs duty upon the said oils. There being no response, this petition was filed.

The said exemption notification, as it read at the relevant time, stated: "In exercise of the powers conferred by Sub-rule (1) of Rule 8 of the Central Excise Rules, 1944, the Central Government hereby exempts the following vegetable non-essential oils, falling under Item No. 12 of the First Schedule to the Central Excises and Salt Act, 1944 (1 of 1944) from the whole of the duty of excise leviable thereon--

(a) all sorts of vegetable non-essential oils, other than processed vegetable non-essential oils;

(b) Vegetable non-essential oil, falling under Item No. 12 of the First Schedule to the Central Excises and Salt Act, 1944 (1 of 1944), whether produced in the factory of production of the excisable goods specified below or elsewhere, if used after it is processed in the manufacture of--

(i) goods falling under Item Nos. 13, 14 and 15 or the First Schedule to the Central Excises and Salt Act, 1944, and

(ii) artificial or synthetic resins falling under Item No.15A of the said Schedule:

Provided that in respect of vegetable non-essential oils produced elsewhere than in the factory of production of the said excisable goods, the procedure set out in Rule 56A of the Central Excise Rules, 1944 is followed:

Provided further that no such exemption shall be allowed in respect of vegetable non-essential oils used in the manufacture of finished excisable goods if such finished excisable goods produced by the manufacturer are exempted from the whole of the duty of excise leviable thereon or are chargeable to nil rate of duty.

Explanation�For the purpose of this notification "processed vegetable non-essential oil" means a vegetable non-essential oil which has undergone, subsequent to its extraction, any one or more of the following processes, namely:--

(i) Treatment with an alkali or acid;

(ii) Bleaching;

(iii) Deodorization

....

A Division Bench of this Court, in Century Enka Ltd. v. Union of India 1982 ELT 64, construed Section 3 of the Customs Tariff Act and held mat if certain goods were totally exempt from the payment of the excise duty leviable thereon, no additional (or countervailing) customs duty could be levied upon the import of those goods. Mr. Chinoy, learned Counsel for the petitioners, submitted that the said oils were totally exempt from the payment of the excise duty leviable (hereon by reason of the said exemption notification and that, therefore, no additional customs duty could be levied on the import thereof.

Mr.Devadhar, learned Counsel for the respondents, drew my attention to the judgment of a Division Bench of this Court in Ashok Traders v. Union of India [1988] 15 ECC 372 where it was held that if an exemption notification under the Excise Act placed conditions upon the satisfaction of which the exemption in respect of certain goods could be availed or, an importer of such goods had to satisfy those conditions before he could validly claim that no additional duty u/s 3 of the Customs Tariff Act was leviable thereon. The Division Bench rejected the submission that the importer was obliged only to satisfy such conditions as were possible of satisfaction.

In Mr. Devadhar''s submission the said exemption notification gave vegetable non-essential oils a conditional exemption from the payment of excise duty. It did not, therefore, entitle the petitioners to claim that they were not liable to the levy of additional duty upon oils imported by them.

An interpretation of the said exemption notification is called for. Clause (a) grants an exemption from excise duty to unprocessed vegetable non-essential oils. Clause (b) states, however, that if vegetable non-essential oil is used after it is processed in the manner therein set out the exemption would not be available.

It is difficult to interpret Clause (b) as applying to processed vegetable non-essential oils, as Mr. Chinoy suggested. Clause (b) also applies to unprocessed vegetable non-essential oil which is "used after it is processed" in the manner therein stated.

My attention was drawn by Mr. Chinoy to the fact that the said exemption notification had, along with various other similar exemption notifications, been rescinded and replaced by a composite exemption notification in 1984. The relevant provision thereof reads thus:

It was submitted by Mr. Chinoy that I was entitled to take into account the subsequent notification to interpret the said exemption notification. Based thereon, he said, it was clear that Clause (b) of the said exemption notification applied to processed vegetable non-essential oils. Having applied my mind to the said exemption notification. I am clear as to the meaning that has to be given to it. It would then be impermissible to resort to any external aid to interpretation, whether it be the subsequent notification or orders of the CEGAT and the Government of India in revision that Mr. Chinoy referred me to.

It is well to remember that we are not here dealing not with a claim to exemption from excise duty but to a exemption from the additional duty of customs. This court has held that if an exemption notification under the Excise Act places conditions upon the satisfaction of which the exemption in respect of certain goods can be availed of, an importer of such goods has to satisfy those conditions, failing which he cannot validly claim that no additional duty is leviable thereon. (Ashok Traders case, ibid). In my view the said exemption notification, read as a whole, does not unconditionally exempt vegetable non-essential oils from the payment of excise duty for the exemption thereunder is not available to vegetable non-essential oil that is used after it is processed in the manner therein set out. The relevant condition being unsatisfied, the petitioners are not entitled to claim that they are exempt by reason of the said exemption notification from the payment of the said additional duty upon the vegetable non-essential oils imported by them.

Accordingly, the petition is dismissed.

No order as to costs.