2018 (5) TMI 1711 - AT - Central Excise

Duty of excise on clearance of dutiable by-products - by-products/waste products/residue products such as soap stock (gum), sludge, fatty acid oil, spent earth etc. arising on manufacture of refined edible oils from the mustard seeds - whether products arising as waste or by-product during the manufacture of refined edible oil are entitled for the benefit of Notification 89/95-CE dated 18/02/1995. - Held that - This issue is no longer res-integra as decided 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 , where it was held that the removal of unwanted materials resulting in products like gums, waxes and fatty acid with odour cannot be called as a process of manufacture of these gums, waxes and fatty acid with odour - items in question cannot be called as manufactured excisable goods. These incidental products are nothing but waste arising during the course of refining of rice brain oil - benefit of notification allowed. Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
Interpretation of Notification No. 89/95-CE dated 18/02/1995 regarding exemption of waste products arising during the manufacture of refined edible oils from payment of central excise duty.

Detailed Analysis:

Issue 1: Interpretation of Notification No. 89/95-CE
The appellant, engaged in manufacturing refined edible oils, faced a demand for central excise duty on dutiable by-products like soap stock, sludge, fatty acid oil, and spent earth arising during the manufacturing process. The appellant claimed exemption under Notification No. 89/95-CE dated 18/02/1995, which exempts waste products from duty if they arise during the manufacturing of a final product chargeable to nil rate or fully exempted. The Department disagreed with the appellant's interpretation, leading to the issuance of a show cause notice and subsequent confirmation of the duty demand by the Adjudicating Authority.

Issue 2: Precedent and Legal Interpretation
The Tribunal referred to a Larger Bench interim order dated 30th January, 2018, which clarified that the disputed items were not by-products of the manufacture of refined edible oil. It was held that the items like gums, waxes, and fatty acids resulting from the removal of unwanted materials were not part of the manufacturing process of refined oil. The Tribunal emphasized that these incidental products were waste arising during the refining process and, therefore, covered by the exemption under Notification No. 89/95-CE. Citing the case of Ricela Health Foods Ltd. and others vs. CCE, Chandigarh, the Tribunal noted that the Allahabad regional bench had also extended the benefit of the notification to waste products generated during the manufacture of refined edible oil.

Conclusion:
Based on the precedent set by the Larger Bench and the extension of benefits in similar cases, the Tribunal allowed the appeal, setting aside the order-in-appeal. The judgment reaffirmed that waste products like fatty acid oil, sludge, soap stock, and spent earth arising during the manufacture of refined edible oils were covered by the exemption under Notification No. 89/95-CE. The decision highlighted the distinction between manufacturing by-products and waste products, providing clarity on the applicability of duty exemptions in such cases.