Holding

The exemption under Notification No. 262/86‑CE is available only to the actual manufacturer who must produce the required certificate; the appellant failed to do so and therefore is not entitled to the benefit.

Summary

Vinay Solvent Extraction Industries Pvt. Ltd. (appellant) manufactured processed fixed vegetable oil on a job‑work basis for Vijay Oil Mill and claimed exemption under Notification No. 262/86‑CE, which exempts such oil if the manufacturer produces a certificate from a Deputy Director of the Directorate of Vanaspati confirming the oil is derived by solvent extraction. The appellant, though holding a central excise licence, was not registered with the Directorate of Vanaspati and could not obtain the required certificate. It produced certificates showing that Vijay Oil Mill had manufactured the oil, but the Supreme Court held that the certificate must be in the name of the actual manufacturer, i.e., the appellant, and that Vijay Oil Mill, lacking a licence and not paying excise duty, could not claim the exemption. Consequently, the appellant was not entitled to the benefit of the notification. The Court dismissed the appeal.

Issues considered

Whether the appellant, as the actual manufacturer, is entitled to the exemption under Notification No. 262/86‑CE.
Whether a certificate issued in the name of Vijay Oil Mill satisfies the certificate requirement of the notification.
Whether Vijay Oil Mill, lacking a central excise licence and not paying excise duty, can claim the exemption.

Legislation cited

Subjects

central exciseexemption notificationjob worksolvent extractioncertificate requirementlicenceexcise dutyclassificationCentral Excise Tariff

Judgment

M/S VINAY SOLVENT EXTRACTION INDUSTRIES PVT. LTD. A
v.
COMMISSIONER OF CENTRAL EXCISE, GUJARAT

APRIL 20, 2005

(S.N. VARIAVA, DR. AR. LAKSHMANAN AND S.H. KAPADIA, JJ.] B

Central Excises and Salt Act, 1944 :

Exemption Notification No.262186-CE dated 24.4.1986-Eligibility
under-Appellants undertaking job work ofmanufacturing processed vegetable C
oil on behalf of supplier of oil cakes-Certificate by the Deputy Director of
Vanaspati required under Clause (iii) of the Notification not available with
the appellants-Held: Appellants not entitled to the benefit of Notification--
Even supplier of oil cakes not entitled to the benefit as it did not have a
licence under the Act-Central Excise Tariff Act, 1985-Heading 1503.10. D

Appellants had been manufacturing processed fixed vegetable oil on job
work basis for Vijay Oil Mill out of oil cakes supplied by them. They filed
classification list classifying the product under Central Excise Item No. 1503.10
and claimed benefit of Notification No.262/86-CE. Department issued show
cause notice on the appellants denying the benefit of the said Notification as E
they had not produced certificate as required under Clause (iii) of the said
Notification.

The appellant then produced requisite certificate from the Directorate
of Vanaspati, to the effect that vegetable oil was manufactured by Vijay Oil
Mill, and it had been manufactured from fixed vegetable oil extracted by F

- solvent method. Assistant Collector dropped the proceedings. Collector
(Appeal) allowed the department's appeal. Appellants were unsuccessful in
their appeal before the Tribunal Hence the present appeal

Dismissing the appeal, the Court
G
HELD : 1. The Tribunal was right in holding that the appellants were
not entitled to benefit of Notification No. 262/86-CE. Admittedly, the
Appellants are the manufacturers. They are maintaining the record and
clearing the goods: Under Clause (iii), it is the Appellants who have to produce
687 H
688 SUPREME COURT REPORTS [2005] 3 S.C.R.

A the required certificate which must necessarily show that the processed fixed
vegetable oil manufactured by the Appellants was manufactured from fixed
vegetable oils extracted by solvent extraction method. To get such a certificate
the Appellants would have to be registered with the Directorate ofVansapati,
Vegetable Oils and Fats, which admittedly they are not Thereafter, Appellants
B produced certificates certifying that Vijay Oil Mills had manufactured such
oil, but as the Appellants are the manufacturer, such a certificate was of no
help. (693-C-E)

2. Vijay Oil Mills would also not be. entitled to the benefit of the
Notification as they did not have a licence under the Central Excise Act and
C had not complied with any of the formalities under the Central Excise Act
More importantly they were not paying any excise duty. A party who
admittedly is not paying excise duty cannot claim exemption from duty.
(695-C-D]

CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 2523-2529
D of2000.

From the Judgment and Order dated 18.11.99 of the Central Excise,
Customs and Gold (Control) Appellate Tribunal, New Delhi in F.O .. Nos.
1024-1030/99-C in A. Nos. E/851-857 of 1991-C.

V. Lakshmikumaran, R.K. Hasija, Alok Yadav and V. Balachandran
E with him for the Appellant.

T.S. Doabia, Manish Sharma and P. Parmeswaran with him for the
Respondent.

The Judgment of the Court was delivered by
F
S.N. VARIAVA, J. These Appeals are filed against an Order dated
18th November, 1999 of the Customs, Excise and Gold (Control) Appellate
Tribunal (CEGA T).

Briefly stated the facts are as follows.
G 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,
H who are holding a valid .Central Excise Licence, would be undertaking
VINA Y SOLVENT EXTRACTION INDUSTRIES PVT. LTD. v. C.C.E. [VARIAVA, J.] 689

manufacturing activities for and on their behalf, i.e., or. behalf of Vijay Oil A
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.
B
The declaration filed along with the letter is relevant and it reads as
follows :-
"rCRM OF AUTHORISATION TO BE FILLED _IN BY A
MANUFACTURER WHO GETS HIS GOODS MANUFACTURED/
FAB RICA TED FROM ANY OTHER PERSON AND TO BE C
AGREED TO BY THE LATTER

From : VIJA Y OIL MILL
Full Address : Outside Majevadi,
Gate, JUNAGADH-362001 D

Phone No. if any: 25347/25397
To,
The Superintendent of Central Excise,
Range JUNAGADH Division - Junagadh
E
AUTHORISATION

I/We, Vijay Oil Mill, Outside Majevadi Gate, Junagadh hereby
authorize Mis. Vinay Solvent Extraction Industries Private Limited of
Sukhpur, Junagadh (holding Central Excise licence in form L.4 No.
JUN/VNE0/2/80 to manufacture/fabricate on my/our behalf Refined F
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 information relating to the price
at which f/we sell the said goods (excisable commodity) including G
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
H
690 SUPREME COURT REPORTS [2005) 3 S.C.R.

:A DATE : (Signature)
Manufacturer who gets his
goods manufactured from any
other person or his authorized
Agent.
.I/We VINA Y SOLVENT EXTRACTION INDUSTIRES PRIVATE
B LIMITED of Sukhpur (JUNAGADH) holding Central Excise licence
in fonn L-4 No. JUNNEN0/2/80 at SUKHPUR hereby accept the
above authorization and agree to discharge all liabilities under the
Central Excises and Salt Act, I 944 and Rules made thereunder in
respect of the said goods manufacturedfrom time to time by me/us on
c behalf of the above mentioned manufacturer.

PLACE: Sukhpur
DATE: (Signature)
Actual Manufacturer or his
Authorised Agent."
D (emphasis supplied)
It is thus to be seen that the letter and the declaration are under
Notification No. 305177. 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
E the procedural fonnalities and discharge liapilities 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.

F It must be mentioned that the parties also entered into a Lease Agreement
/
which inter alia contained the following clauses :-

"I. 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 I 000 Kgs.

2. The rates including the unloading of raw materials and the loading
G 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-on per year ending financial year.

H 4. Oils, other than solvent extracted oils, will be charge for refining
VINA Y SOLVENT EXTRACTION INDUSTRIES PVT. LTD. v. C.C.E. [VARIAVA, J.] 691

at Rs.700.00 per metric ton of oil." A
This Lease Agreement also indicates that the Appellants have leased
out the factory to Vijay Oil Mill, who would supply the oil cakes to tht:
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 B
material and loading of finisped goods at the cost of the Appellants. Vijay Oil
Mills was to pay a minimu~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 C
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. D
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 E
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. F
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 G
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. H
692 SUPREME COURT REPORTS [2005] 3 S.C.R.

A 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 Ot~t above, Vijay Oil Mills had filed a declaration, which had
been accepted by the Appellants, that the Appellants were the actual
B 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
C follows:-
"In exercise of the Powers conferred by sub-rule (I) 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 (5of1986) (hereinafter
D referred to as the said processed fixed vegetable oils) from the whole
of the duty of excise Ieviable 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
E 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;
F
(iii) the manufacturer shall within such period as the Assistant
Collector of Central Excise may allow in 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
G 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
-
H of Central Excise to have been manufactured from fixed
VINAYSOLVENTEXTRACTIONINDUSTRIESPVT.LTD. v.C.C.E.[VARIAVA, J.] 693

vegetable oils extracted by solvent extraction method an A
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 B
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 C
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 D
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 E
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.
p.
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. G
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 H
694 SUPREME COURT REPORTS (2005) 3 S.C.R.

A 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
B manufactured processed oil from fixed vegetable oils extracted by solvent
extraction method is obviously not sufficient.

Faced with this situation Mr. Lakshmikumaran submitted that the
Tribunal has given a categorical finding to the following effect :
c " ...... _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
D 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."
E
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.

F 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
G 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
H Appellant who filed the classification list and cleared t~ goods. It was only
VINA Y SOLVENT EXTRACTION INDUSTRIES PVT. LTD. "· C.C.E. [VARIAVA, J.] 695

in reply to the show-cause notice that a contrary case was put up and confusion A
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 ofVanaspati, 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 B
vegetab~e oils are not sufficient. The App~llants 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 C
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 fonnalities under the Central Excise Act. MQre importantly they are not
paying any excise duty. A party who admittedly is not paying excise duty
cannot claim exemption from duty.
D
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 E
the Central Excise Act. The Appellants maintain the requisite records. The
Appell:ints clear the goods. Condition No.(ii) of the Notification has been
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, F
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.
G
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.

D.G. Appeals dismissed.