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2011 (7) TMI 968 - AT - Central ExciseBy product versus waste - Whether the fatty acids/soap stock, waxes and gums obtained in course of refining of the vegetable oils are eligible for duty exemption under the Notification No. 89/95-C.E - It is a statutory obligation of the manufacturers of refined vegetable oil and vanaspati to remove free fatty acids, gums and waxes, as these substances are toxic substances - Held that - The waxes and gums obtained in course of refining is covered by heading 1522. As regards soap stock, the same would also be covered by Heading 1522, as, as per HSN Explanatory Notes of heading 1522, this heading among other things, covers soap stocks which are the by-product of oil refining, produced by neutralisation of free fatty acids with a base (sodium hydroxide) and consist of mixture of crude soap, natural oils or fats. As regards, fatty acids obtained in course of refining, the same by virtue of Chapter Note 1(e) to Chapter 15 are excluded from the purview of Chapter 15 and the same are specifically covered by Heading 3823. Therefore, each of the three by-products, soap stock/fatty acids, waxes and gums are the manufactured products covered by Central Excise Tariff and since it is not under dispute that the same are marketable, the same have to be treated as excisable product chargeable to Central Excise Duty. A distinction has to be made between the term by-product and the term waste. - The by-product would be waste only if it is of no value or negligible value something which the manufacture would want to get rid of - Held that the products, in question, have not been shown to be of no value or negligible value which have only to be discarded, the same would not be eligible for exemption under Notification No. 89/95-C.E - Decided against the assessee
Issues Involved:
1. Eligibility of duty exemption under Notification No. 89/95-C.E. for fatty acids/soap stock, waxes, and gums obtained during the refining of vegetable oils. 2. Classification of soap stock/fatty acids, waxes, and gums under the Central Excise Tariff. 3. Determination of whether these by-products can be considered as "waste" under the said notification. Issue-Wise Detailed Analysis: 1. Eligibility of Duty Exemption under Notification No. 89/95-C.E.: The primary issue was whether fatty acids/soap stock, waxes, and gums obtained during the refining of vegetable oils qualify for duty exemption under Notification No. 89/95-C.E. The notification exempts "waste, parings, and scrap" arising during the manufacture of exempted goods. The Tribunal considered whether these by-products could be classified as "waste" and thus eligible for exemption. Key Points: - The manufacturers argued that these by-products are toxic substances and should be considered waste, citing previous Tribunal decisions like CCE, Hyderabad v. Priyanka Refineries Ltd., where soap stock was deemed waste and eligible for exemption. - The Department contended that by-products with market value, such as fatty acids/soap stock, waxes, and gums, cannot be treated as waste. They argued that the exemption is only applicable to items of no or negligible value. 2. Classification under Central Excise Tariff: The Tribunal examined the classification of these by-products under the Central Excise Tariff to determine their excisability. Key Points: - The manufacturers claimed that these by-products are fractions of vegetable oils and should be classified under Heading 1516, which is fully exempt from duty. - The Tribunal concluded that soap stock and waxes fall under Heading 1522, while fatty acids are excluded from Chapter 15 and classified under Heading 3823. Therefore, these are excisable products. 3. Determination of "Waste": The Tribunal analyzed whether the by-products can be considered "waste" under the notification, given the lack of a specific definition in the notification or Central Excise Act. Key Points: - The Tribunal referred to dictionary definitions and judicial pronouncements to distinguish between "by-product" and "waste." - It was concluded that by-products with significant market value cannot be treated as waste. The prices of fatty acids, soap stock, waxes, and gums indicated they are not of negligible value and thus do not qualify as waste. Conclusion: The Tribunal held that the by-products in question (fatty acids/soap stock, waxes, and gums) are not waste and are therefore not eligible for duty exemption under Notification No. 89/95-C.E. Consequently: - The appeals by the Revenue (Sl. No. 1 to 6) were allowed, setting aside the impugned orders. - The appeals by the manufacturers (Sl. No. 7 & 8) were dismissed, upholding the impugned orders. (Pronounced in open court on 25-7-2011)
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