2018 (7) TMI 671 - AT - Central Excise

Levy of duty - Waste - Fatty Acid, Soap Stock, Spent Earth etc. - Whether the fatty acid, soap stock and spent earth emerged during the course of manufacture of refined oil is to be treated as waste or liable to excise duty or not? - Held that - The said issue was considered by the Larger Bench of the Tribunal in the decision in the case of M/s Ricela Health Foods Ltd. & Others Vs. CCE, Chandigarh, Allahabad 2018 (2) TMI 1395 - CESTAT NEW DELHI , and the Tribunal has held that the process of manufacture is for refined oil and the waste which arises during the course of such manufacture cannot be considered as manufactured excisable goods. Thus, no duty can be demanded on such items like fatty acids, soap stock and spent earth, which arise during the course of manufacture of refined oils. Demand cannot sustain - appeal allowed - decided in favor of appellant.

Summary

Issues:
Allegation of failure to discharge duty on clearances of Fatty Acid, Soap Stock, Spent Earth; Eligibility for SSI exemption benefit; Whether waste during manufacture of refined oil is liable to excise duty.

Analysis:
The appellants were accused of not paying duty on clearances of by-products like Fatty Acid, Soap Stock, and Spent Earth arising during the manufacture of refined oils. The department contended that these items were liable for excise duty, thereby disqualifying the appellants from SSI exemption. After due process, the adjudicating authority upheld the duty demand, interest, and penalties. The appellants challenged this decision before the Tribunal.

The appellant's counsel argued that waste products like palm oil waste and waste earth generated during the production of refined oil are not subject to Central Excise duty. She cited a precedent from the Larger Bench of the Tribunal in support of this position. The department's representative reiterated the findings of the impugned order.

The key issue revolved around whether by-products such as fatty acid, soap stock, and spent earth, resulting from the manufacture of refined oils, should be classified as waste subject to excise duty. The Tribunal referenced the Larger Bench decision, which clarified that waste arising during the manufacturing process of refined oils cannot be considered excisable goods. The Tribunal emphasized that the value a product may command does not determine its classification as waste or by-product. In this case, the products in question were deemed waste arising during the refining process, not manufactured goods subject to excise duty.

Consequently, the Tribunal ruled in favor of the appellants, stating that the demand for duty was unsustainable. The impugned orders were set aside, and the appeals were allowed, granting consequential reliefs to the appellants.