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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.