2001 (3) TMI 136 - AT - Central Excise

Summary

Issues:
1. Demand of duty on soap stock manufactured by the appellants.
2. Imposition of penalty and interest by the Commissioner.
3. Treatment of soapy water as soap stock by the Commissioner.
4. Marketability of soapy water and soap stock.
5. Error in valuation and conclusion by the Commissioner.
6. Production and sale of Acid Oil by the appellants.
7. Quantity assessment and marketability of soap stock.

Analysis:
1. The appellants, engaged in the manufacture of Vanaspati, were issued a show cause notice demanding duty on soap stock manufactured by them. The appellants contended that they did not manufacture or sell any soap stock during the mentioned period but only Acid Oil. The Commissioner confirmed the demand and imposed a penalty under Section 11AC of the Central Excise Act, along with interest. The appellants challenged this order.

2. The "Process Flow Sheet" provided by the manufacturer indicated that soapy matter obtained during oil manufacture was processed to yield Acid Oil, a marketable commodity exempt from duty. Soap stock, with fat content ranging from 15.98% to 33.16%, was previously manufactured and sold by the appellants. The Commissioner assessed the soapy water as soap stock, valuing it erroneously at Rs. 4,111/- per unit.

3. The Commissioner's conclusion that the soapy water was marketable was found to be incorrect as per Indian Standard specifications for soap stock, which require a minimum of 20% total fatty matter. The soapy water with less than 5% fat concentration was not marketable or considered soap stock. The Commissioner's valuation error further compounded the issue.

4. The appellants' assertion that no soap stock was produced after a certain date was disputed by the Commissioner without supporting data. It was clarified that Acid Oil was being produced and sold during that period, not soap stock. The marketability of soap stock during the relevant period was questioned.

5. The judgment highlighted the error in the Commissioner's assessment, emphasizing that the quantity considered as soap stock was, in fact, soapy water, which is not a marketable commodity. The valuation based on a previous invoice with higher fat concentration was deemed incorrect.

6. The production and sale of Acid Oil by the appellants were emphasized, indicating that soap stock was not the product manufactured during the relevant period. The Commissioner's error in assessing soap stock quantity based on Acid Oil production was noted.

7. The appeal was allowed, and the impugned order was set aside entirely based on the findings that the soapy water was not marketable as soap stock, and the valuation and conclusions made by the Commissioner were erroneous. The marketability and production of soap stock during the relevant period were clarified, leading to the decision in favor of the appellants.