2018 (11) TMI 965 - AT - Central Excise

Excisability - by-products viz. Fatty Acid, Waxes, Spent Earth - final product exempt from payment of duty - Held that - This issue is no more res integra and has been settled by the Larger Bench of the Delhi Tribunal of the CESTAT in the case of M/s. Ricela Health Foods Ltd. Vs. CCE, Chandigarh, Allahabad 2018 (2) TMI 1395 - CESTAT NEW DELHI , where it was held that the assessee is eligible for exemption under the said Notification as the by-product is not a manufactured goods and is a waste - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Applicability of Central Excise duty on by-products obtained during the manufacture of Refined Edible Oil
- Interpretation of Notification No. 89/95 CE dated 18.05.1995
- Whether the by-products are exempted from excise duty as waste
- Legal implications of selling waste as excisable goods
- Jurisdiction of excise duty based on the manufacturing process
- Conflict in decisions of Division Benches regarding the classification of by-products

Analysis:

The appeal involved a dispute regarding the liability to pay Central Excise duty on by-products obtained during the manufacturing process of Refined Edible Oil. The appellant, a manufacturer of Refined Edible Oil, faced a demand for duty on by-products like Fatty Acid, Waxes, and Spent Earth, despite the exemption of the main product, Sunflower oil, from excise duties. The Department issued a show-cause notice proposing to deny the exemption and demanded duty along with interest and penalty. The adjudicating authority confirmed the demand, leading to an appeal before the Commissioner, who upheld the decision, prompting the present appeal.

During the hearing, the appellant argued that the by-products were waste generated during the manufacturing process and should be exempted under Notification No. 89/95 CE dated 18.05.1995. The appellant cited judicial precedents, including decisions by the Larger Bench of the Delhi Tribunal, to support their claim that the by-products should not be considered manufactured goods subject to excise duty. They emphasized that the waste was not intended for manufacturing and relied on various judgments to assert that the mere sale of waste does not make it excisable goods.

On the contrary, the respondent defended the demand for excise duty, referring to a Tribunal decision upheld by the Supreme Court. The Tribunal noted conflicting decisions on the issue and highlighted the findings of the Larger Bench, which clarified that the by-products in question were waste arising during the refining process and not manufactured excisable goods. The Tribunal emphasized that the value a product may fetch should not determine its classification as waste or by-product. Based on the Larger Bench's decision and the principles laid down by the Apex Court, the Tribunal concluded that the appellant was eligible for exemption under the notification, setting aside the impugned order and allowing the appeal.

In conclusion, the Tribunal's detailed analysis resolved the conflicting decisions and established that the by-products were waste exempted from excise duty. The judgment provided clarity on the classification of waste generated during manufacturing processes and upheld the appellant's claim for exemption, emphasizing the legal distinction between manufactured goods and waste in excise duty matters.