# Union 1,f India v. V.IAi Olollt & Gmml Mills - **Citation:** [1963] Supp. 1 S.C.R. 586 - **Court:** Supreme Court of India - **Decided:** 1963 - **Bench:** B. P. Sinha, P. B. Gajendragadkar, K. N. Wanchoo, K. C. Das Gupta, j. 0. SHAH - **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/union-1-f-india-v-v-iai-olollt-gmml-mills-2731 - **Pages:** 13 ## Headnote • E.xcise Duty-Manufacture of Vanaspaii-'Refined oil' ·if an intermediate product-Liability-'Manufacturing' and 'prowsing'-Distinction-Oentral Excises and Salt Act, 1944 (1of1944), s. 2 (.f)-First Schedule, !Um 23. The respondents, who were manufacturers of Vegetable products known as Vanaspati, were assessed to excise duty under item 23 of the First Schedule to the Central Excises and Salt Act, 1944, on what the taxing authorities called the manufacture of 'refined oi'' from raw oil which according to them fell within the description of "vegetable non-essential oils, all sorts, in or in relation to the manufacture of which any process is ordinarily carried on with the aid of power". 1'he co.rrunon case made by the respondents in their petition under Art. 226 of the Constitution challenging the imposition was that for the purpose of manufacturing Vanaspati they purchased gTOundnut and til oil from the market and subjected them to different processe' before applying hydrogenation to produce Vanaspati and that nothing that they produced at any stage was covered by that item. Affidavits by experts were filed by both the parties aud the High Court found in favour of the respondents and allowed the petitions. The Union of India appealed. It was ur11ed on its behalf that before finally producing Vanaspati the respondents produced at an intermediate stage what was known as •refined oil' in the market and although they might not sell it and although Vanaspati, when produced, was liable to excise duty under another item, that could not affect their liability. Held, that excise duty being leviable on the manufacture of goods and not on their sale, the petitioners would no doubt be liable if they produced 'refined oil', as known in the market, at an intermediate stage. But it was clear that there could be no 'refined oil' as known in the market without dcodorisatio,n according to the specification of the Indian Standards Institute and the affidavits of the experts. Since, however, the process 1 $.C.R. SUPREME COURT REPORTS 587 of deodorisation was admittedly applied in the respondents' factories only after hydrogenation was complete, they could not be said to produce 'refined oil' at any stage. Nor could the respondents be held to manufacture some kind of 'non-essential vegetable oil'. 'Processing' cannot be equated to 'manufacture' which nieans bringing into existence a new substance. The Legislature by definin~ the word 'manufacture' in s, 2(f) of the Act did not intend to make the mere processing of goods liable to duty. The words "all sorts" in item 23 are intended only to make it clear that vegetable non- essential oi!s. whether raw or refined, from whatever raw material produced, will be liable to excise duty. CIVIL APPELLATE jum~mcnoN : Civil Appeals Nos. 168-170 ofl960. Appeals from the judgment and order dated April 10, 1958, of the Circuit Bench of the Punjab High Court at Delhi in Civil Writs N'.:>s. 301, 302 and 347 ofl956. G. S. Pathak, B. Sen and R. If. !Jhebar, for the appellants. N. 0. Ohatterjee, A. N. Sinh1' and P. K. Mukherjee, for the respondent (in C.A. No. 168/60). A. V. Viswa'IU!tha Sostri, Sardar Bahadur, S. N. Andley and Rameshwar Nath, for the respondent in (C.A. No. 169/60). A. V. Viswa'IU!tha 8astri, S. f(. Kapnr and K. K. Jain, for the respondents (in C.A. No. 170/60). N. A. Palkhivala, J. 13. lJaduchanji, 0. G'. Mathur and Ravinder Narain. for the Interveners (in all the appeals.) 1962. October 12. The Judgment of the Court was delivered by DAS GUPTA, ].-These three appeals are against the orders of the Punjab High Court allowing JJ(j2 Union of /11tlia v. Delhi C 11th f1f Gtn1r«l Mills lJas Guptn, J. 1962 Union 1,f India v. V.IAi Olollt & Gmml Mills Das Gupt•, J. 588 SUPREME COURT REPORTS [1963] SUPP. three petitions under Art. 226 of the Constitution. The three petitions are by three different companies manufacturing vegetable products known as Vanaspati and they challenge the legality of the imposition of ## Text 1962 586 SUPREME COURT REPORTS [1963] SUPP. UNION OF INDIA "· DELHI CLOTH & GENERAL MILLS (B. P. SINHA, c. J., P. B. GAJENDRAGADKAR, K. N. WANCHOO, K. C. DAS GUPTA and j. 0. SHAH, JJ.) • E.xcise Duty-Manufacture of Vanaspaii-'Refined oil' ·if an intermediate product-Liability-'Manufacturing' and 'prowsing'-Distinction-Oentral Excises and Salt Act, 1944 (1of1944), s. 2 (.f)-First Schedule, !Um 23. The respondents, who were manufacturers of Vegetable products known as Vanaspati, were assessed to excise duty under item 23 of the First Schedule to the Central Excises and Salt Act, 1944, on what the taxing authorities called the manufacture of 'refined oi'' from raw oil which according to them fell within the description of "vegetable non-essential oils, all sorts, in or in relation to the manufacture of which any process is ordinarily carried on with the aid of power". 1'he co.rrunon case made by the respondents in their petition under Art. 226 of the Constitution challenging the imposition was that for the purpose of manufacturing Vanaspati they purchased gTOundnut and til oil from the market and subjected them to different processe' before applying hydrogenation to produce Vanaspati and that nothing that they produced at any stage was covered by that item. Affidavits by experts were filed by both the parties aud the High Court found in favour of the respondents and allowed the petitions. The Union of India appealed. It was ur11ed on its behalf that before finally producing Vanaspati the respondents produced at an intermediate stage what was known as •refined oil' in the market and although they might not sell it and although Vanaspati, when produced, was liable to excise duty under another item, that could not affect their liability. Held, that excise duty being leviable on the manufacture of goods and not on their sale, the petitioners would no doubt be liable if they produced 'refined oil', as known in the market, at an intermediate stage. But it was clear that there could be no 'refined oil' as known in the market without dcodorisatio,n according to the specification of the Indian Standards Institute and the affidavits of the experts. Since, however, the process 1 $.C.R. SUPREME COURT REPORTS 587 of deodorisation was admittedly applied in the respondents' factories only after hydrogenation was complete, they could not be said to produce 'refined oil' at any stage. Nor could the respondents be held to manufacture some kind of 'non-essential vegetable oil'. 'Processing' cannot be equated to 'manufacture' which nieans bringing into existence a new substance. The Legislature by definin~ the word 'manufacture' in s, 2(f) of the Act did not intend to make the mere processing of goods liable to duty. The words "all sorts" in item 23 are intended only to make it clear that vegetable non- essential oi!s. whether raw or refined, from whatever raw material produced, will be liable to excise duty. CIVIL APPELLATE jum~mcnoN : Civil Appeals Nos. 168-170 ofl960. Appeals from the judgment and order dated April 10, 1958, of the Circuit Bench of the Punjab High Court at Delhi in Civil Writs N'.:>s. 301, 302 and 347 ofl956. G. S. Pathak, B. Sen and R. If. !Jhebar, for the appellants. N. 0. Ohatterjee, A. N. Sinh1' and P. K. Mukherjee, for the respondent (in C.A. No. 168/60). A. V. Viswa'IU!tha Sostri, Sardar Bahadur, S. N. Andley and Rameshwar Nath, for the respondent in (C.A. No. 169/60). A. V. Viswa'IU!tha 8astri, S. f(. Kapnr and K. K. Jain, for the respondents (in C.A. No. 170/60). N. A. Palkhivala, J. 13. lJaduchanji, 0. G'. Mathur and Ravinder Narain. for the Interveners (in all the appeals.) 1962. October 12. The Judgment of the Court was delivered by DAS GUPTA, ].-These three appeals are against the orders of the Punjab High Court allowing JJ(j2 Union of /11tlia v. Delhi C 11th f1f Gtn1r«l Mills lJas Guptn, J. 1962 Union 1,f India v. V.IAi Olollt & Gmml Mills Das Gupt•, J. 588 SUPREME COURT REPORTS [1963] SUPP. three petitions under Art. 226 of the Constitution. The three petitions are by three different companies manufacturing vegetable products known as Vanaspati and they challenge the legality of the imposition of Excise duty on what was called by the taxing authorities as the manufacture of "refined oil" from raw oil. These petitions raise a common question of law as regards the liability to excise duty under Item 23 of the first schedule to the Central Excises and Salt Act l of 1944, on similar facts. The petitions were heard together and disposed of by a common judgment allowing ·the appeals and directing the excise authorities to withdraw the impugned demand of excise duty on the petitioners. The present appeals have also been heard together. The facts alleged in the three separate petitions filed by the three petitioners (the respondents herein), the manufacturers of Vanaspati, are practically the same. It is said that for the purpose of manufacturing Vanaspati the petitioners purchased groundnut and til oil from the open , market or directly from the manufacturers of such oil. The oils thus purchased are subjected to different processes in order to tum them into Vanaspati. It is their case that the only finished product they manufacture from the raw materials thus purchased is Vanaspati which is liable l:o excise duty as a vegetable product. They contend that at no stage do they produce any new product which can come within the item described in the Schedule as " vegetable non-essential oils, all sorts in or in relation to the manufacture of which any process is ordinarily carried on with the aid of power." Accordingly, it is said, the demand for excise duty on the ground that they produce from the raw oils purchased a product which is liable to duty under item 23 of the Schedule (now item 12) is illegal. In resisting these petitions the Union of India contended, in substance, that in the course of the • 1 S.C.R. SUPREME COURT REPORTS 589 manufacture of Vanaspati, the vegetable product from raw groundnut and til oil, the petitioners bring into existence at one stage, after carrying out some processes with the aid of power, what is known to the market as "refined oil". This "refined oil" falls within the description of "vegetable non-essential oils, all sorts,. in or in relation to the manufacture of which any process is ordinarily carried on with the aid of power," and so is liable to excise duty. The affidavit filed bv l\tfr. P. S. Krishnan, Chief Chemist, Central Revenue, Central Laboratory, Government of India, in support of this contention of the appellant, describes the process by which raw oil is manufactured into Vanaspati thus:- "The manufacture of vegetable product consists in hydrogenating oils using a catalyst. The catalyst is a sensitive material and is liable to be poisoned and made ineffective if certain impurities like mucilaginous matter, free oxidised fatty acid and moisture are present. In order therefore, to successfully manufacture vegetable product the hydrogenation has to be done on a refined vegetable non-essential oil. The refined vegeta hie non -essential oil (an oil free from major impurities mentioned in paragraph 2 above) is the penultimate raw material for the manufacture of. vegetable product . The vegetable non-essential oils as obtained by crushing containing the impurities mentioned earlier are raw vegetable non-essential oils. The process of refining them consists in adding an aqueous solution of an alkali which will combine with the free fatty acids to form a soap and S!'ttle down with it a large amount of suspended and mucilaginous matter; after settling the clear supernatant layer is drawn off and treated with an appropriate quantity of bleaching earth and carbon is then filtered. In 1962 Unwn •f bun• v; D1/lti Clolh & Ci'1tru•l Mitis DasGu;ltl, J. 191i2 Uni111 of India v. Drllii CMh Vt Genct•l Mills lhs Gu;ta, J, 590 SUPREME COURT REPORTS [1963] SUPP. this process the colouring matter is removed and the moisture that was originally present in the neutralised oil will also be removed. At this stage the oil is a refined oil and is suitable for hydrogenation into vegetable product. This process of refining generally involves the use of power and machinery." He then goes on to say :- "Depending upon the quality of the seed used for crushing and that of the original raw oil this refined oil will now generally be suitable for edible purposes of discriminating users and for the manufacture of toilet goods like hair oils and high class soaps. For certain users who are even more discriminating this oil may be subjected to a further process of deodorisation. The difference between raw vegetable nonessential oils and refined vegetable oils wili clearly be seen on examination of the two products. The refined oil will generally be colourless or only slightly coloured. It will be perfectly clear and in many cases it may have no odour. The raw oil, on the other hand, will have a certain amount of turbidity or sediment at the bottom and will also be somewhat deep in colour. I further say that sometimes refined oil obtained above is subjected to a process of further deodorization. Such oil can be corrl'ctly described as refined and deodorised oil. As far as known to me, the two grades of oils are separately marketed in the country; as for example, 'groundnut oil' and 'refined groundnut oil' the latter generally with a distinctive label when marketed in containers of approximately 4 gallons or less." • 1 S.C.R. SUPREME COURT REPORTS 591 The experts who have filed affidavits in sup· port of tht petitioners' case agree with Mr. Krishnan that common oils, like groundnut, sesame, mustard, cottonseed, etc., in their raw stage always contain varying amounts of impurities and these impurities have to be removed by different processes before hydrogenation for the purpose of producing Vanaspati can be applied. There is however this important difference between the view of Dr. Homi Ruttonji Nanji who has filed an affidavit in support of the petitions, and that of Mr. Krishnan that while according to Mr. Krishnan the raw oil which has been freed from impurities but not deodorised is sold in the market as refined oil, Dr. Nanji is definite in his statement that refined oil for edible purposes, as understood hy the manufacturers as we!J as by the trade, is oil to which all the three processes, viz., neutralization, bleaching and deodorisation have been applied. He goes on to say: "In fact I would not regard any oil as refined oil unless it was also deodorised, since the failure to deodorise oil leaves behind in the oil certain impurities in the shape of compounds which give off bad odours." (Vide para. 5 of his affidavit in the petition filed by the Delhi Cloth & General Mills Co., Ltd.). As already stated the High Court accepted the petitioners' contention that the oil in their hands after some amount of refinement in the course of being converted into Vanaspati was not liable to excise duty under item 23 (Now item 12) and so allowed the petitions. In support of the appeals, Mr. Pathak has advanced a two-fold argument. He first argues that the respondent concerns after they buy the raw oil 1with all its impurities, manufacture by the application of certain processes of refinement, a refined oil which is the same as the refined oil available in the market, and the aid of power is taken in some of these 1962 Union of lnt!ia v. Delhi Clot/I & Central Mills Das Gupta, /. 19P2 Uni .. of lniiA v. D