2009 (5) TMI 419 - AT - Central Excise

Exemption- Notification No. 89/95-C.E.- The respondents are manufacturers of edible vegetable refined oil and vanaspathi falling under sub-heading Nos. 1508/1510/1512/1516 etc., of the Central Excise Tariff, the respondents procure crude vegetable oil from various sources and convert/process the same into refined vegetable edible oils and vanaspathi. During the course of processing of crude vegetable oils into refined vegetable oils, soap stocks emerge as a by-product apart from sludge etc., From the manufacturing process of the refining of vegetable oils, it is inevitable that soap stocks emerge as a by-product, which is normally used in the manufacture of soap. The respondent cleared the by-product/soap stocks by paying the duty @ 16% adv., With effect from 1-3-2005, refined vegetable edible oils and vanaspathi were exempt by Notification No. 4/2005-C.E., dated 1-3-2005. The respondents discontinued filing the monthly statutory returns in form, ER 1 with the department and did not furnish the information about the excisable goods manufactured and cleared from. 03/2005. Hence, a show cause notice dated was issued for demand of duty of Rs. 17,83,576/- and for imposition of penalty and interest, The Adjudication authority extended the benefit of notification No. 89/95 C.E. dated 18-5-1995 and dropped all other proceedings. The Commissioner of Central Excise, Hyderabad reviewed the OIO and directed an appeal be filed before Commissioner (Appeals). The appeal was rejected by the Commissioner (Appeals). Held that- we find that the soap stock which arises/emerges during the refining of vegetable oil is a waste for the respondents, though the Revenue may call it as a by-product. Accordingly, on merits as well as on the law, the Revenue (Appeals) is devoid of merits and are liable to be rejected and we do so.

Summary

Issues:
1. Application of principles of res judicata.
2. Classification of soap stock as a by-product or waste for the benefit of Notification No. 89/95.

Analysis:

Issue 1: Application of principles of res judicata
The Tribunal considered whether the principles of res judicata would apply in the case at hand. The Tribunal referred to the decision of the Hon'ble Supreme Court in C.K. Gangadharan v. Commr. of Income Tax, Cochin, emphasizing that the revenue cannot take opposite stands in different cases involving identical issues for the same assessee. The Tribunal noted that in previous instances, the revenue had accepted orders in favor of the respondents, and higher authorities had consciously decided not to appeal against those orders. Citing various Supreme Court cases, the Tribunal concluded that the revenue cannot adopt contradictory positions on the same issue for the same assessee. Therefore, the Tribunal held that the principles of res judicata applied, and the revenue's appeals were devoid of merits.

Issue 2: Classification of soap stock for Notification No. 89/95
Regarding the classification of soap stock as a by-product or waste for the benefit of Notification No. 89/95, the Tribunal analyzed the nature of soap stock arising during the manufacturing of refined vegetable oil. The revenue argued that soap stock had distinctive characteristics and uses, falling under Central Excise Tariff 1522 00 20. However, the respondents contended that soap stock was a waste product, not a by-product. The Tribunal considered the Supreme Court's decision in Khandelwal Metal & Engg. Works, which supported the respondents' argument. The Tribunal found that the respondents were engaged in refining edible oil, not manufacturing soap stock, and therefore, the soap stock was deemed a waste for the respondents. The Tribunal concluded that the revenue's arguments lacked merit both factually and legally, leading to the rejection of the revenue's appeals.

In conclusion, the Tribunal upheld the lower authorities' decisions, applying the principles of res judicata and determining that the soap stock arising during the refining of vegetable oil should be considered a waste rather than a by-product for the purpose of Notification No. 89/95.