Mumbai: In a ruling that may have far reaching ramifications, the Supreme Court has held that refining of vegetable oil, which existed as edible oil even prior to refining, does not amount to manufacture and, hence, does not attract excise duty that can be levied on manufacture of refined oils.

The Suppreme Court was disposing off a civil appeal filed 20 years ago by Shyam Oilcake, a Rajasthan-based company, against the judgment of CEGAT (Customs, Excise and Gold (Control) Appellate Tribunal), saying, "Neither in the section note nor in the chapter note nor in the tariff item do we find any indication that the process indicated is to amount to manufacture."

The apex court observed that that in the process of refining as actual manufacturing does not take place, the deeming provision cannot be brought into play in the absence of it being specifically stated that the process amounts to manufacture. The court added that for a deeming provision to come into play, it must be specifically stated that a particular process amounts to manufacture.

As a number of companies in the past two years have committed large investments in shifting their refining units to areas like Kandla in Gujarat, which enjoy excise-free status, this ruling has created tremendous interest in the country's vegetable oil trading circles.

Excise duty on manufacture of refined oil was withdrawn in 1996 but was re-introduced in 2003. Refiners have since then been protesting against the levy, but the government has remained firm.

At present, excise duty on manufacture of refined oil is Rs 1,000 a tonne and Rs 1,250 on vanaspati.