2006 (3) TMI 430 - AT - Central Excise

Summary

Issues:
1. Whether the appellants are liable to pay an amount equal to 8% of the value of exempted products under Rule 12 of the Cenvat Credit Rules, 2002 along with interest due to the exemption of soap stock/acid oil from duty.
2. Whether soap stock/acid oil are final products or bye products arising during the manufacture of refined edible oil.
3. Whether the appellants are essentially engaged in the manufacture of refined oil or soap stock, determining their liability to pay duty at the rate of 8% under Rule 57CC.

Analysis:

Issue 1: The appellants were issued a Show Cause Notice demanding payment equal to 8% of the value of exempted products due to the exemption of soap stock/acid oil from duty. The lower authorities confirmed the demand but the Commissioner (Appeals) set aside the order, citing that soap stock/acid oil were only bye products and not subject to Rule 12. The Tribunal noted the Commissioner's reliance on a previous decision related to a different product and upheld the Commissioner's decision, stating that the appellants cannot be made liable under Rule 57CC as the finished product, refined edible oil, is dutiable.

Issue 2: The appellants argued that soap stock/acid oil are final products, not bye products, and cited relevant Tribunal decisions. They contended that the product in question was soap stock and edible oil, not lean gas/off gases as in the previous case. The respondents, however, maintained that soap stock and edible oil are indeed bye products arising during the manufacture of refined oil, supported by precedents regarding waste products in other industries. They argued that the finished product is refined edible oil, which is dutiable, and therefore the Commissioner (Appeals)'s order should be upheld.

Issue 3: After considering both sides' submissions, the Tribunal found that the previous CESTAT decisions cited were not relevant as they involved exemptions for both intermediate and final products, unlike the present case where only the finished product, refined edible oil, is dutiable. The Tribunal concluded that the appellants are primarily engaged in the manufacture of refined oil, not soap stock, which is a bye product. Therefore, the Tribunal dismissed the appeal, upholding the Commissioner (Appeals)'s order.

In conclusion, the Tribunal determined that the appellants are not liable to pay duty at the rate of 8% under Rule 57CC as the finished product, refined edible oil, is dutiable, and they are engaged in the manufacture of refined oil rather than soap stock. The decision was based on distinguishing between final and bye products and the specific duty liabilities under the relevant rules.