2011 (3) TMI 684 - AT - Central Excise

Demand - Notification No. 89/95-C.E. dated 18th May 1995 as well as Notification No. 3/2006-C.E. dated 1st March 2006 - As regards the first ground of challenge, the same is totally devoid of substance as the communication dated 21st December 2009 by the Chief Commissioner is not in any manner being dealt with on judicial or quasi-judicial side As regards the second ground of challenge, the fatty acid has been specifically excluded from Chapter 15 under note 1(e) and, therefore, question of granting benefit of Notification No. 3/2006 cannot arise - the dual test to consider the excisability of a product stands satisfied and hence the process amounts to manufacture within the meaning of the said term under Section 2F which includes incidental and supplementary processes. Since the fatty acid cannot be a waste, question of exemption available under Notification No. 89/95 does not arise - Stay granted partly.

Summary

Issues:
1. Denial of benefit under Notification No. 89/95-C.E. and Notification No. 3/2006-C.E.
2. Contention regarding duty payment on fatty acid.
3. Challenge of the impugned order on four grounds.
4. Defense of the order regarding the classification of fatty acid.
5. Validity of the Chief Commissioner's communication.
6. Exclusion of fatty acid from Chapter 15 and its classification as a by-product.
7. Decision on the stay application.

Analysis:

1. The appellants contested the denial of benefits under Notification No. 89/95-C.E. and Notification No. 3/2006-C.E. regarding the demand confirmed by the Additional Commissioner. The appellants argued that the vanaspati oil and refined oil are duty-exempt, leading to the show cause notice issued in 2009. The Adjudicating Authority upheld the demand and penalty against the appellants.

2. The main contention revolved around the duty payment on fatty acid, considered a waste arising during the manufacture of vanaspati ghee. The appellants challenged the order on the grounds that the waste product should not attract duty, citing the Chief Commissioner's acceptance of this view. They also argued that the fatty acid is exempt under Notification No. 3/06-C.E. and is not liable to duty.

3. The challenge against the impugned order was based on four grounds. Firstly, the acceptance of waste product exemption by the Chief Commissioner. Secondly, the classification of fatty acid under Central Excise Tariff Heading 15.11. Thirdly, the manufacturing process of fatty acid not amounting to excisability under Section 2F. Lastly, the exemption under Notification No. 89/95-C.E. was emphasized, supported by a relevant Supreme Court decision.

4. The defense of the order highlighted that fatty acid is excluded from Chapter 15 and is not a waste product but a by-product of vanaspati ghee manufacture. It was argued that since the product is not waste, it does not qualify for the exemption under Notification No. 89/95-C.E.

5. The validity of the Chief Commissioner's communication was questioned, stating that it cannot override the quasi-judicial order passed after due process. The communication was deemed administrative and not binding on the judicial decision-making process.

6. The exclusion of fatty acid from Chapter 15 and its classification as a by-product were crucial points of consideration. The product's marketability and the process satisfying the excisability criteria were emphasized, leading to the conclusion that the fatty acid is not a waste and hence not eligible for the exemption.

7. The decision on the stay application directed the appellants to deposit a specified amount within a given period while waiving the remaining balance demanded under the impugned order. The directive was made based on the lack of a prima facie case for a total waiver of the demanded amount, emphasizing compliance within a stipulated timeframe.