2024 (12) TMI 1449 - AT - Central Excise

Benefit of SSI exemption under N/N. 8/2003 dated 01.03.2003 - exceeding the threshold turnover Rs. 400 lakhs in the preceding Financial Year - whether the appellant is eligible for the benefit of N/Ns. 89/95-CE dated 18.05.2005 in respect of other products viz., Acid oil, Fatty acid, Waxes and Gums, which are generated during the course of manufacture of refined oil and if they were held eligible, whether they are eligible for the benefit of SSI N/N. 8/2003-CE dated 01.03.2003 as amended? HELD THAT - The issue of products viz., acid oil, fatty acid, gums and waxes, which are generated during the process of refining of crude edible oil to produce refined edible oil has been the subject matter in the case of M/s. Ricela Health Foods 2018 (2) TMI 1395 - CESTAT NEW DELHI , Vinayak Agrotech 2017 (11) TMI 598 - CESTAT NEW DELHI , Arihant Solvex 2019 (1) TMI 235 - CESTAT NEW DELHI and it has been decided that these products can be treated as waste during the manufacture of refined edible oil, which is an exempt product and they are entitled for the benefit of exemption Notification No. 89/95-CE dated 18.05.1995. Further, it is found that this Tribunal in the case of M/s. Habib Agro Industries and in the case of the appellant s own case 2023 (8) TMI 654 - CESTAT BANGALORE has decided that the Acid oil, Fatty acid, Gums and Waxes generated during the process of refining of oil are eligible for the benefit of Notification 89/95-CE dated 18.05.1995, considering them as waste. Conclusion - By-products generated as incidental to the manufacture of exempt goods can qualify as waste - appellant's eligibility for the exemption under Notification No. 89/95-CE affirmed - SSI exemption denied due to exceeding the turnover threshold.

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in the judgment are:

Whether the appellant is eligible for the benefit of Notification No. 89/95-CE dated 18.05.1995 with respect to Acid Oil, Fatty Acid, Waxes, and Gums generated during the manufacture of refined oil.
Whether these products can be considered as 'waste' and thus exempt from excise duty under the said notification.
Whether the appellant is eligible for the Small Scale Industry (SSI) exemption under Notification No. 8/2003-CE dated 01.03.2003.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Eligibility for Notification No. 89/95-CE

Relevant legal framework and precedents: Notification No. 89/95-CE exempts waste, parings, and scrap arising in the course of manufacture of exempted goods from excise duty. The legal question revolves around whether the by-products in question can be classified as such.
Court's interpretation and reasoning: The court analyzed whether the by-products generated during the refining process could be classified as 'waste' under the notification. The court noted that the appellant's products have distinct names and marketability, which traditionally would exclude them from being considered waste.
Key evidence and findings: The court considered the appellant's argument that these by-products were not intentionally manufactured but were incidental to the production of refined oil. The appellant relied on various precedents to support this claim.
Application of law to facts: The court applied the definition of "excisable goods" as per Section 2(d) of the Central Excise Act, 1944, which includes any article that can be bought and sold. This was crucial in determining the marketability of the by-products.
Treatment of competing arguments: The court weighed the appellant's reliance on precedents against the revenue's argument that the by-products were distinct products due to their marketability and manufacturing process.
Conclusions: The court concluded that the by-products should be considered as waste, thus eligible for exemption under Notification No. 89/95-CE.

Issue 2: Eligibility for SSI Exemption

Relevant legal framework and precedents: Notification No. 8/2003-CE provides SSI exemption, subject to the condition that the turnover does not exceed a certain threshold.
Court's interpretation and reasoning: The court noted that the appellant exceeded the threshold turnover of Rs. 4 Crore in the preceding financial year, thus making them ineligible for the SSI exemption.
Key evidence and findings: The court upheld the findings of the adjudicating authority and the Commissioner (Appeals) based on the turnover data provided.
Application of law to facts: The court applied the turnover threshold criteria as stipulated in the SSI exemption notification.
Treatment of competing arguments: The appellant did not contest the turnover figures, and thus the court found no basis to grant SSI exemption.
Conclusions: The court upheld the decision to deny SSI exemption to the appellant.

3. SIGNIFICANT HOLDINGS

The court held that "the Acid oil, Fatty acid, Gums, and Waxes generated during the process of refining of oil are eligible for the benefit of Notification 89/95-CE dated 18.05.1995, considering them as waste."
The court established the principle that by-products generated as incidental to the manufacture of exempt goods can qualify as waste under the relevant exemption notification, provided they meet certain criteria.
The final determination was that the appeal was allowed with consequential relief, affirming the appellant's eligibility for the exemption under Notification No. 89/95-CE, but denying SSI exemption due to exceeding the turnover threshold.

The judgment underscores the importance of distinguishing between intentionally manufactured goods and incidental by-products in the context of excise duty exemptions. The court's reliance on the definition of "excisable goods" and the interpretation of marketability were pivotal in reaching its decision.

← Previous Next →