2015 (9) TMI 1024 - AT - Central Excise

Emergence of waste, parings and scrap or by-product - whether the fatty acids, wax and gum are to be treated as waste - Exemption under Notification No. 3/06-CE dated 01/3/06 - the fatty acids, wax and gum are to be treated as waste Since on the issue involved in this case, there are two conflicting judgments of two coordinate benches, in our view, this matter would merit reference to Larger Bench, In view of this, the Registry is directed to place this matter before Hon ble President for considering the Constitution of a Larger Bench for deciding the following point - Whether fatty acids, wax and gum arising in course of manufacture of refined vegetable oil are to be treated as waste for the purpose of exemption Notification No. 89/95-CE and would be exempt from duty under this notification and whether in this regard, the Apex Court s order 2012 (1) TMI 176 - SUPREME COURT affirming the Tribunal s judgment in the case of CCE, Jalandhar vs. A.G. Fats Ltd. (2011 (7) TMI 968 - CESTAT, NEW DELHI) by dismissing the civil appeal filed against the Tribunal s judgment would be a binding precedent . Matter referred to larger bench.

Summary

Issues:
1. Classification of fatty acids, wax, and gum as waste for exemption under Notification No. 89/95-CE.
2. Interpretation of conflicting judgments regarding the classification of by-products in the manufacturing process of refined vegetable oil.

Issue 1: Classification of by-products for exemption under Notification No. 89/95-CE

The case involves the manufacturing of refined vegetable oil where fatty acids, wax, and gum emerge as by-products. The dispute centers around whether these by-products should be considered "waste" for exemption under Notification No. 89/95-CE. The Department argued that these by-products are not waste and thus not exempt from duty, issuing show cause notices for duty demands. The Tribunal discussed conflicting judgments: one holding that the by-products are not waste and another stating they are waste eligible for exemption. The Tribunal noted that the term "waste" in the exemption notification should include only by-products of no or little value fit to be discarded. Fatty acids, wax, and gum in this case were found to be marketable products with commercial value, not meeting the criteria of waste. The Tribunal emphasized that marketable by-products should not be classified as waste merely due to being unintended products in the manufacturing process.

Issue 2: Interpretation of conflicting judgments

The Tribunal analyzed conflicting judgments by different benches regarding the classification of by-products in the manufacturing of refined vegetable oil. While one bench held that the by-products were not waste, another bench took the view that they were waste eligible for exemption. The Tribunal emphasized that by-products with commercial value should not be considered waste, contrary to the interpretation made in the conflicting judgment. The Tribunal highlighted the importance of distinguishing between marketable by-products and true waste in determining their eligibility for exemption under Notification No. 89/95-CE. Due to the conflicting decisions, the Tribunal decided to refer the matter to a Larger Bench for clarification on whether fatty acids, wax, and gum should be treated as waste for exemption under the notification and whether the Apex Court's order affirming a previous judgment would be a binding precedent.

This detailed analysis of the legal judgment showcases the complexities involved in interpreting the classification of by-products in excise duty exemptions and the significance of resolving conflicting judgments through a reference to a Larger Bench for further clarity and consistency in legal interpretation.