2024 (1) TMI 1211 - AT - Central Excise

Excisable goods or not - Soap Stock arising during the manufacture of groundnut refined oil - period April 2006 to February 2015 - benefit of the Notification No. 89/95 CE dated 18.05.1995 - HELD THAT - The Larger Bench of this Tribunal in the case of M/S RICELA HEALTH FOODS LTD., M/S J.V.L. AGRO INDUSTRIAL LTD., M/S KISSAN FATS LIMITED VERSUS CCE, CHANDIGARH, ALLAHABAD 2018 (2) TMI 1395 - CESTAT NEW DELHI had considered the issue as to whether the fatty acids, Waxes and gum arising in the manufacture of refined vegetable oil are to be treated as WASTE for the purpose of exemption under Notification No. 89/95 CE or otherwise. The Larger Bench held that it is clear that the value that the product may or may not fetch cannot be a determinative factor to decide whether the same as manufactured final product/byproduct or a waste/refuse arising during the course of manufacture of final products. Relying on the judgement of the Apex Court in COMMISSIONER OF CENTRAL EXCISE VERSUS INDIAN ALUMINIUM CO. LTD. 2006 (9) TMI 6 - SUPREME COURT , the larger bench held that removal of unwanted material resulting in products like gum, wax, and fatty acid cannot be called as process of manufacture of such items. As such, incidental products are nothing but waste arising during the course of refining of rice bran oil and on applying the ratio of the Apex Court, this cannot be considered as manufactured excisable goods. The impugned order set aside - appeal allowed.

Summary

Issues Involved:
1. Excisability of Soap Stock arising during the manufacture of groundnut refined oil.
2. Applicability of Notification No. 89/95-CE for exemption.
3. Determination of intent to evade duty and imposition of penalties.

Summary:

1. Excisability of Soap Stock:
The appellant, M/s Jugal Kishore Vanaspati Products (P) Ltd., contested the excise duty demand on Soap Stock, arguing it was not a manufactured product. They cited chapter notes and legal precedents, including the Bombay High Court decision in Indian Aluminium vs A.K. Bandyopadhyay, asserting that Soap Stock, like dross and skimmings, is a by-product or waste, not a distinct manufactured article. The Tribunal noted that the process of refining groundnut oil does not intentionally produce Soap Stock as a primary product, and thus, it should not be considered as manufactured goods under section 2(f) of the Central Excise Act.

2. Applicability of Notification No. 89/95-CE:
The Commissioner (Appeals) had denied the exemption under Notification No. 89/95-CE, but the Tribunal referenced the Larger Bench decision in Ricela Health Foods Ltd. vs Commissioner, which held that unintended by-products like fatty acids, waxes, and gums arising during oil refining are considered waste and not manufactured goods. This view was supported by the Supreme Court in Commissioner of Central Excise, Chandigarh vs Marico Ltd. The Tribunal concluded that Soap Stock is akin to waste and thus eligible for exemption under Notification No. 89/95-CE.

3. Intent to Evade Duty and Imposition of Penalties:
The Commissioner (Appeals) had upheld the penalties, asserting that the appellant intended to evade duty by not seeking clarification post-withdrawal of Notification No. 115/75-CE. However, given the Tribunal's determination that Soap Stock is not a manufactured product and is exempt under Notification No. 89/95-CE, the basis for penalties was invalidated.

Conclusion:
The Tribunal set aside the impugned order, recognizing Soap Stock as non-excisable waste eligible for exemption, and allowed the appeals, nullifying the excise duty demand and associated penalties.