ORDER
N.K. Bajpai, Member (T)
1. These three appeals involve consideration of a common question viz. interpretation of Notification 115/75-C.E., dated 30-4-1975 as amended by Notification 122/75 dated 5-5-1975 and were heard together. They are therefore being disposed of by this common order.
2. Briefly stated, the facts are that the two respondents manufacture, inter alia, oleoresins falling under Heading 1301.90. These products are manufactured from items like chillies, ginger, cardamom, pepper, turmeric etc. by the solvent extraction method. The respondents in the first two appeals, claimed refund of duties paid on oleoresins in terms of Notification 115/75 while the respondents in the third appeal were asked to take out a Central Excise because for the manufacture of these goods which were held to be classifiable under Item 68 of the erstwhile Central Excise Tariff – an order which was set aside by Collector (Appeals). On rejection of their refund claim, they appealed to the Collector of Central Excise (Appeals), Madras who allowed their appeal and decided that oleoresins were entitled to the benefit of exemption under Notification 115/75. Hence the departments’ appeal to the Tribunal in all the three cases.
3. It is necessary to examine Notification 115/75 which is reproduced below:- ( both under the new Tariff as well as under the old Tariff)
Exemption to goods manufactured in factories covered by specified industries –
“In exercise of the powers conferred by Rule 8(1) of the Central Excise Rules, 1944, the Central Government hereby exempts goods falling under Item No. 68 of the First Schedule to the Central Excises and Salt Act, 1944 (1 of 1944), manufactured in factories covered by any of the industries specified in the Schedule hereto annexed, from the whole of the duty of excise leviable thereon:
THE SCHEDULE
1. Coir Industry.
2. Cashew Industry.
3. Tanning Industry.
4. Oil Mill and Solvent Extraction Industry.
5. Rice Milling Industry.
Exemption to goods in specified industries
Goods falling under the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), and manufactured in factories covered by any of the industries specified in the Schedule hereto annexed are exempt from the whole of the duty of the excise leviable thereon:
THE SCHEDULE
1. Coir Industry.
2. Cashew Industry.
3. Tanning Industry.
4. Oil Mill and Solvent Extraction Industry (other than fixed vegetable oils of heading No. 15.03 and vegetable fats and oils of heading No. 15.04).
5. Rice Milling Industry.
4. While the claim of the respondents for exemption from duty has been allowed by Collector (Appeals) in terms of Serial No. (4) of the Schedule on the ground that these goods are manufactured in the ‘oil mill and solvent extraction industry’, the appellants have contested this claim on the interpretation that Serial No. (4) does not extend to items like oleoresins which are not products of the oil mill industry though they may have been manufactured with the solvent extraction process. The short point for consideration is the meaning and scope of the words ‘Oil Mill and solvent extraction industry’ in the notification.
5. The argument of the respondents proceeds on the basis that – by plain reading and applying the rules of interpretation – it cannot be said that any solvent extraction industry not connected with oil mill would also be covered by this entry since in that case there would have been a separate entry for that in the Schedule.
6. Each entry of the Schedule to the Notification 115/75-C.E., dated 30-4-1975 covers on industry. Solvent extraction industry is not the last industry of the Schedule since the fifth and final entry is there in the Schedule. Hence the word ‘and’ used in entry No. 4 between the words “oil mill” and “solvent extraction” has to be interpreted in such a way as to mean that only that industry wherein oil is milled and solvent extraction process in connection with such milling of oil is employed, would be covered under this entry.
7. The doctrine of “ejusdem generis” is applicable when the subject-matter of interpretation is enumeration constituting a class or category. As per this rule the general words in this case, namely, “solvent extraction” following the specific words “oil mill” take the colour of specific words thereby the meaning of solvent extraction is restricted to that of one connected with oil mill. Hence, goods of any solvent extraction industry not connected with oil mill cannot be exteneded the benefit of Notification 115/75 as amended.
8. In a company law case, the House of Lords while interpreting the words “to carry on the business of mechanical engineers and general contractors” as appearing in a memorandum of association, observed that the generality of the expression “general contractors” was limited by the previous words “mechanical Engineers” and that it ought to be confined to the making of contracts connected with that business. [Ashbury Rait-way Carriage and Iron Co., v. Riche – (1875) L.R. 7 H.L. 653]. Similarly, in this case the generality of the expression ‘solvent extraction’, which is a process generally employed to obtain finished products, is restricted to mean such process carried on in oil mill.
9. Among the additional grounds taken in all the appeals is that the term ‘Oleoresins’ refers to a natural combination of resins and essential oils occurring in or exuded from plants and is distinct from the term ‘oil’ used in Notification 115/75. The claim is that the expression ‘oil mill’ and ‘solvent extraction industry’ refers to only the vegetable non-essential oils. Since the respondents are using the solvent extraction method for essential oils, which cannot by the very nature of the goods come within the purview of oil mill industry because the spices used are commercially on a much smaller scale than those in the non-essential vegetable oils.
10. Smt. Vijay Zutshi, the learned Chief Departmental Representative, cited the publication “Technology & Refining of Oils & Fats” by T.L. Mahatta [Small Business Publications, 4/45 Roop Nagar, Delhi] in support of the view that solvent extraction method is used extensively as one of the three methods by the oil milling in India and quoted from it as under :-
“The oil milling industry in India may be divided into three groups depending upon the methods of milling. These are : ghani (manual/animal-driven or small power driven), large oil mills (registered under Factories Act) using presses and expellers, and plants using solvent extraction techniques.” (Chapter I -Status of Vegetable Oil Industry in India – page 2)
11. The publication then goes on to describe the solvent extraction method and the different solvents used for the purpose. It may be useful to reproduce some of the relevant portions :-
“Solvent Extraction Processes
Oilseeds may be solvent extracted by means of the follwing process : percolation, immersion and combined percolation immersion. The first process is carried out by percolation of the solvent through the seed mass by first spraying it from the top and letting it tickle through the bed of seeds through empty spaces. In other words, in this process the solvent forms a continuously changing liquid film over the whole surface of the seed granules. It is distinguished from the immersion process in that in the latter process the seed mass is completely immersed in the solvent even if the solvent is circulating.”
12. Continuing her arguments on the solvent extraction method as used in the oil mill industry, Smt. Zutshi placed reliance on another publication” Edible Oil Technology” by Dr. A.P. Bhatnagar & Dr. Daljit Singh, both Professors of Punjab Agricultural University, Ludhiana (SBP Publications, Delhi) which, in Chapter 5, deals with the Solvent Extraction Plant in the following words :-
“Solvent extraction in general implies removal of soluble material from an insoluble solid phase by dissolution in a liquid solvent…
“Solvent extraction, as applied to the oil industry, involves the leaching of oil from an oil bearing seed or cake specially prepared for efficient extraction, by a hydrocarbon solvent, generally n-hexane. Groundnut oil cake, rice bran and soyabean are specially amenable to such treatment.”
13. Explaining the term ‘industry’ Smt. Zutshi referred to its definition as given in Black’s Law Dictionary (Fifth Edition 1979) which is reproduced below :-
“Industry. – Any department or branch of art, occupation, or business con-ducted as a means of livelihood or for profit; especially, one which employs much labour and capital and is a distinct branch of trade.”
14. Smt. Zutshi then raised a question whether it was correct to regard the solvent extraction method as an industry and answered it by saying that it was only a method of extraction of solvents. She submitted that Serial No. 4 of the notification did not contemplate two industries – viz. (a) the oil mill industry (b) the solvent extraction industry. On the question of interpretation of notification she referred to the Supreme Court judgment in the case of Hemraj Gordhandas v. H.H. Dave reported in 1978 (2) ELT J 350 in which the Court had observed in para 5 as under :-
“It is well-established that in a taxing statute there is no room for any in-tendment but regard must be had to the clear meaning of the words. The entire matter is governed wholly by the language of the notification. If the tax-payer is within the plain terms of the exemption it cannot be denied its benefit by calling in aid any supposed intention of the exempting authority. If such intention can be gathered from the contention of the words of the notification or by necessary implication therefrom, the matter is different.”
15. Thereafter, Smt. Zutshi quoted the following definition of vegetable oil from Hawley’s Condensed Chemical Dictionary XIth edition :
“Vegetable – An oil extracted from the seeds, fruits, or nuts of plants and generally con-oil sidered to be a mixture of mixed glycerides, (e.g., cotton-seed, linseed, corn, coconut, babassu, olive, tung, peanut, perilla, oiticica, etc.). Many types are edible. Being plant-derived products, vegetable oils are a form of bio-mass. Some are reported to be convertible to liquid fuels by passing them over zeolite catalysts.”
16. Referring to the ‘ejusdem generis’ rule, she submitted that in an expression when ‘particular words’ pertaining to a class, category or genus are followed by ‘general words’, the meaning of the latter, i.e. of the general words has to be construed as being limited to things of the same kind which are specified in the particular words. Applying this principle to the expression ‘oil mill and solvent extraction industry’, she explained that the solvent extraction method has to be restricted to the oil mill industry by the ejusdem generis principle of interpretation.
17. Arguing on Appeal No. E/2782/90-D, Smt. Zutshi invited attention to the letter dated 27th March, 1989 from the respondents addressed to the Assistant Collector in which a reference was made to a Guntur Collectorate trade notice about exemption of soap stock produced by solvent extraction method in premises other than an oil mill to which exemption under Notification 115/75 had been extended. In this connection, she referred to the decision of the Tribunal in the case of Fertilisers Ltd. v. Collector of Central Excise [reported in 1990 (50) ELT 468] and stated that this decision lays down the guidelines for the interpretation of Notification 115/75 although it does not directly deal with oleoresins.
18. Countering the arguments of Smt. Zutshi, Shri Joseph Vellapally, Senior Advocate assisted by Shri Sudhir Gopi, Advocate, stated that although Serial No. 3 of the notification refers to the tanning industry, it is well known that tanning is only a process and not an industry. He also submitted that the word ‘industry’ has been used in the body of the notification itself and therefore the interpretation would be that solvent extraction technique is also included in the entry. The logic for this argument was that excepting for the tanning industry which is animal-based, the remaining five are products of the agricultural industry. He explained that it was a composite notification where the raw materials of both the agricultural and animal world were exempted.
19. Referring to the reliance placed by the appellants on the ‘ejusdem generis’ rule, Shri Vellapally contested the claim on the ground that for this rule to be applicable, more than one example of the species must find place in the expression to constitute a genus – whereas, in the present case, the only words used being ‘oil mill’, the ejusdem generis principle could not be applied for interpreting the expression ‘oil mill and solvent extraction industry’. However, he did not dispute that the expression ‘solvent extraction industry’ would, mean the process as well as the technique of solvent extraction.
20. Shri Vijayaraghawan, learned Consultant for M/s. Bush Boake Allen (India) Ltd., contended that an industry pre-supposes a ‘plant’ and the latter pre-supposes a process or a technique. He submitted that solvent extraction is a method employed for extraction of oils and is the latest one to be adopted in this industry.
21. We have carefully considered the submissions of all the learned Counsels and of the learned Chief Departmental Representative and have also perused the case records. The question that falls for examination is the interpretation of the expression “Oil mill and solvent extraction industry” which finds place at Serial No. (4) of the Schedule to Notification 115/75. We observe that the words used in the body of the notification are “goods manufactured in factories covered by industries specified in the Schedule” (emphasis supplied). It would therefore appear that the word industry’ need not have been used once again in the Schedule. Therefore, no particular significance should be given to the use of this word in the Schedule because the schedule can be interpreted without it too.
22. The publication “Technology of Refining of Oils & Fats” cited by the learned CDR makes it very clear that the solvent extraction method is one of three methods used in the oil milling industry and, this being so, even if it was not mentioned specifically in the Schedule to the notification, the mere mention of oil mill industry as one of the industries to which the exemption was granted, would have meant that the exemption was applicable to oil mills using the solvent extraction method. We have now to consider whether the use of the words ‘solvent extraction’ in Serial No. (4) makes any difference to the scheme of exemption and to what extent the respondents can be denied the benefit of the exemption by the interpretation sought to be placed by the learned CDR. The two expressions at Serial No. (4) would thus be
‘(4) Oil mill’ or
‘(4) Oil mill and solvent extraction’
23. There can be little doubt that the first expression would limit the scope of exemption to the oil mill industry and, solvent extraction method being one of the methods used in the oil industry, the exemption would be applicable to oil mills employing the solvent extraction method even when the words are not used in the entry. As regards the second expression, we have to see whether the addition of the words ‘solvent extraction’ has the effect of enlarging the scope of exemption to cover the respondents’ cases. We have to now take note of the argument that ‘solvent extraction’ is not an industry by itself but only a process or technique of oil milling. Could it then be said that the use of the words ‘solvent extraction’ was redundant in the notification and no new meaning should be read into it? It would only be appropriate to interpret the words ‘solvent extraction’ in the context in which they have been used and, while keeping this aspect in mind, we cannot overlook the fact that ‘solvent extraction’ method would have reference to the oil mill industry. Whether we accept the ‘ejusdem generis’ principle of interpretation or not, the context in which the words have been used cannot be disregarded. Again, when we study the notification as a whole, it would leave little doubt that the exemption is in the context of the oil mill industry and the use of the words ‘solvent extraction’ at best only helps to clarify the scope of the exemption. It cannot have the effect of going beyond the oil mill industry so as to cover oleoresins which may be, as claimed by the respondents, made by the solvent extraction process but do not fall within the purview of oil mill industry.
24. We can examine the matter from another angle. In the additional counter affidavit filed by M/s. Bush Boake Allen India Ltd. in their appeals, reference has been made to the Dictionary of Science & Technology edited by Collot and Dobson for the meaning of the word ‘oils’ to include (in chemistry) the three main classes viz. vegetable oils, mineral oils derived from petroleum, coal, shale etc. and essential oils. Relying on the principles of interpretation as expounded by Maxwell, it has been stated as under:
“The so-called golden rule is really a modification of the literal rule. It was stated in this way by Parke B. It is a very useful rule, in the construction of a statute, to adhere to the ordinary meaning of the words used, and to the grammetical construction, unless that is at variance with the intention of the legislature, to be collected from the statute itself or leads to any manifest absurdity or repugnance, in which case the language may be varied or modified, so as to avoid such inconvenience, but no further.”
25. We observe that while on the one hand the respondents are citing the golden rule of construction to adhere to the ‘ordinary meaning’ of words used in the notification, they are, on the other hand, referring to the Dictionary of Science & Technology to examine the meaning of the word ‘oil’ in chemistry to include ‘essential oils’ as well as mineral oils derived from petroleum. This argument is self-contradictory and has therefore to be rejected. The words ‘oil mill’ as commonly understood refer to vegetable non-essential oils and whenever the intention is to cover ‘essential oils’, these have to be specifically mentioned. We do not therefore think that the oleoresins and essential oils manufactured by the respondents would be covered by entry at Serial No. (4) of the exemption notification. On this interpretation too, the respondents do not have a case for exemption.
26. In view of these considerations, we do not think that the benefit of exemption can be extended to oleoresins. All the three appeals are therefore allowed.