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TMI Blog2011 (7) TMI 968X X X X Extracts X X X X X X X X Extracts X X X X ..... s are obtained as inevitable by-products. For refining of oil, the crude oil is treated with phosphoric acid and/or enzymes along with water maintaining the desired temperature conditions. By this process the gums present in the crude oil get precipitated and are removed by centrifugal process. The de-gemmed oil is bleached by using activated earth under vacuum conditions and this process improves the colour and quality of the oil. The oil, thereafter, is subjected to process of controlled cooling for the purpose of de-waxing and in this process the wax in form of crystals gets separated and is removed by filtration process. After removal of the gum and wax, the oil still contains free fatty acids which are removed by various chemical processes. One process for removal of free fatty acid is neutralisation of oil by pre-determined quantity of alkalis in course of which the free fatty acid get combined with the alkalis and are separated as soap stock. After removal of free fatty acids, the oil is subjected to deodorisation and after the process of deodorisation, the refined vegetable oil emerges. Thus, there are three main by-products all the refining of oil-soap stock/fatty acids, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion under Notification No. 89/95-C.E. The SLP filed by the Government against this decision of the Tribunal has been dismissed by Hon'ble Supreme Court [2011 (274) E.L.T. A16 (S.C.)]. (2) The mere fact that fatty acids/soap stocks, wax and gums are marketable and fetch some price, cannot be a ground for denying the benefit of duty exemption in respect of them under Notification No. 89/95-C.E. by treating them something other than waste. (3) The dispute in this case is as to whether the goods, in question, would fall within the scope of the term 'waste' as appearing in the notification. In absence of any specific definition of the term 'waste' in the said notification or anywhere else in the Central Excise Act or the Rules made thereunder, reliance must be placed on the meaning of the term in various dictionaries or judicial pronouncements according to which the by-products of a manufacturing process are categorically included in the scope of the terms 'waste'. Since, the assessees in these cases manufacture refined vegetable oil or vanaspati and the fatty acid/ soap stock, gums and wax emerge as inevitable by-product in course of removal of var ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l. When the department has accepted the Tribunal's judgment in the case of CCE, Hyderabad v. Priyanka Refineries Ltd. (supra) and as mentioned above, the Government's SLP to Supreme Court against this judgment has been dismissed, a different view cannot be taken by the department in this group of cases. 2.2 Shri B.K. Singh, the learned Jt. CDR and Shri Sunil Kumar, the learned Departmental Representative opposing the contention of the respondents in the appeals at Sl. No. 1 to 6 and of the appellants in the appeals at Sl. No. 7 & 8, pleaded that what the Notification No. 85/95-C.E. exempts is waste, parings and scrap manufactured in a factory which manufactures some final product which is either chargeable to nil rate of duty or is fully exempt from duty by an exemption notification issued under Section 5A of Central Excise Act, 1944, other than the exemption notification granting full duty exemption based on value or quantity of clearances for a financial year, that there is difference between the term 'waste' and 'by-product', that by-product is a product which arises as an inevitable product in course of the manufacture of a final product, which the manufacturer intends to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt in the appeals at Sl. No. 7 & 8 are not eligible for the benefit of Notification No. 89/95-C.E. 2.3 Shri S. Malhotra, Advocate, representing M/s. A.G. Fats Ltd. in rejoinder emphasised that the soap stock/fatty acids, waxes and gums arising in course of refining of vegetable oils are not excisable products, pleaded that just because the same fetched some price, the same cannot be treated as excisable and also emphasised since the period of dispute in this case is prior to 1-3-08 i.e. prior to the amendment of Section 2(d) of Central Excise Act, 1944, the amended definition of excisable goods as given in Section 2(d) of Central Excise Act, 1944 which came into force w.e.f. 10-5-08 cannot be applied retrospectively. 3. We have carefully considered the submissions from both the sides and perused the records. 3.1 The point of dispute in this case is as to whether soap stock/fatty acids, waxes and gums obtained in course of refining of vegetable oil can be treated as waste and, hence, eligible for full duty exemption under Notification No. 89/95-C.E. There is no dispute about the fact that each of these items arising as by-product in course of manufacture of refined ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessees in this group of cases were manufacturing refined vegetable oil and vanaspati which were fully exempt from duty under Notification No. 89/95-C.E., dated 18-5-95 and these units were not manufacturing any other dutiable final product. The point of dispute is as to whether the soap stock/fatty acids, waxes and gums can be said to be the waste. Besides this, the appellants also plead that the items, in question, are fractions of the vegetable oils and, hence, classifiable under Heading 1516 and since all the goods falling under Heading 1516 are fully exempt from duty under Notification No. 3/06-C.E., dated 1-3-06 and its successor notifications, no duty is chargeable in respect of soap stock/acid oil, gums and residue. It is also the contention of the appellant that Chapter Note 6 to Chapter 15 introduced by Finance Act, 2005 providing that the refining of crude edible vegetable oil amounts to manufacture is a deeming provision by which the process of refining of crude oil was made manufacture which otherwise was held by Hon'ble Supreme Court in the case of Shyam Oil Cake Ltd. v. CCE, Jaipur (supra) as not amounting to manufacture and on the basis of this Chapter Note, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant that each of these by-products have to be treated as fractions of vegetable oil covered under heading 1516 is not acceptable, as, as discussed above, while the waxes, gums and soap stocks obtained in course of refining are covered by Heading 1522, the fatty acids obtained in course of refining are specifically excluded from the purview of Chapter 15 by virtue of Chapter Note 1(e) to Chapter 15 and same are specifically covered by Heading 3823 of Chapter 38. Therefore, the plea that these products are classifiable under Heading 1516 and, hence, are fully exempt from duty under Notification No. 3/06-C.E. is not acceptable. 6. Coming to the main point of dispute as to whether the soap stock/fatty acids, waxes and gums obtained in course of refining of crude vegetable oil can be treated as waste, since this term has not been defined in the Notification or in the Central Excise Act, 1944 or the Rules made thereunder, the meaning of this term has to be understood from the dictionary and judicial pronouncements. However, a distinction has to be made between the term 'by-product' and the term 'waste.' Oxford Advanced Learner's Dictionary defines the term "by-product" as a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a binding precedent. When a product emerges as a by-product in course of manufacture of some other product, that by-product cannot be treated as waste just because it is an unintended product arising in course of manufacture of an intended final product. The by-product would be waste only if it is of no value or negligible value something which the manufacture would want to get rid of. No evidence has been produced by the Assessee that the products, in question, are of no value or negligible value, which have to be got rid of. On the contrary, the records indicate that the price of fatty acids, soap stock, waxes and gums is around Rs. 23,000/- per M.T., Rs. 11,000/- to Rs. 13,500/- per M.T., Rs. 10,000/- per M.T. and Rs. 1700 to Rs. 1800 per M.T. respectively. Since the products, in question, have not been shown to be of no value or negligible value which have only to be discarded, the same would not be eligible for exemption under Notification No. 89/95-C.E. 7. In view of the above discussion, so far as appeals at Sl. No. 1 to 6 are concerned, the impugned orders are not sustainable, the same are set aside and the Revenue's appeals are allowed and so far as the appeals at Sl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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