2008 (1) TMI 328 - AT - Central Excise

Appellants manufacturing oil from crude oil purchased from open market - whether the duty is leviable on fatty acid and residues which are by-products of oil Held, no - Revenue was not justified in imposing duty on the fatty acids and residues - benefit of exemption will be available to all factories covered by oil mill or solvent extraction industry since appellants have paid entire amount of duty before issue of SCN in respect of shortage of goods (oil), penalty is set aside

Summary

Issues:
1. Duty leviable on shortage of oil and clearance of refined edible oil without payment of duty.
2. Entitlement to exemption under Notification No. 115/75-C.E.
3. Whether duty is leviable on fatty acid and residues as by-products of oil.
4. Imposition of penalty justified or not.

Analysis:

Issue 1:
The appeals by M/s. Prakash Solvex and M/s. Prakash Soya were taken up together. The demand for duty and penalty was for shortage of oil and clearance of refined edible oil without payment of duty. The appellants did not dispute certain amounts and had already paid them.

Issue 2:
The appellants claimed exemption under Notification No. 115/75-C.E. The contention was that they were entitled to the exemption, and the duty levy was unjustified. They argued that they had paid the duty promptly when demanded for the shortage found.

Issue 3:
The main issue was whether duty was leviable on fatty acid and residues as by-products of oil. The Revenue argued that the benefit of exemption was only available to units engaged in oil extraction, not those purchasing crude oil. However, the Tribunal held that the exemption applied to goods manufactured in factories covered by the oil mill and solvent extraction industry, regardless of the process used. The duty on fatty acids and residues was deemed unjustified.

Issue 4:
Regarding the penalty imposed on M/s. Prakash Solvex, it was contended that since the duty was paid before the show cause notice, the penalty was unwarranted. The Tribunal agreed and set aside the penalty portion of the order.

In conclusion, the Tribunal modified the Commissioner (Appeals) order, holding that the duty on fatty acids and residues was not justified under the exemption notification. The penalty imposed was set aside due to the duty being paid before the notice. The appeals were disposed of accordingly.