In a dispute over by-products generated during refining oil can be qualified as waste, CESTAT orders in favor of the exemption claim

Top Stories Acid oil, Fatty acid, Gums and Waxes generated during the process of refining oil are “Waste”, Eligible for Central Excise Duty Exemption: CESTAT [Read Order] In a dispute over by-products generated during refining oil can be qualified as waste, CESTAT orders in favor of the exemption claim By Kavi Priya – On August 12, 2024 5:10 pm – 2 mins read The Bangalore Bench of Customs, Excise & Service Tax Appellate Tribunal ( CESTAT ) ordered that the by-products (acid oil, fatty acid, gums, and waxes) generated during the oil refining process are considered as waste under Notification No. 89/95-CE dated 18.05.1995 and it is eligible for excise tax exemption. Appellant, M.K Agrotech Pvt. Ltd. is manufacturer of refined oil, classified under Chapter 15 of the Central Excise Tariff Act, 1985, which is exempt under Notification No. 3/2006 dated 01.03.2006. The appellant generates by-products such as acid oil, fatty acid, gums, and waxes during the oil refining process, these impurities are removed from the crude oil and treated as waste. The Department issued a show-cause notice alleging clandestine clearance of these by-products and demanded duty with interest, proposing a penalty under Rule 27 of the Central Excise Rules, 2002 on the waste and by-products generated in November 2008. Ready to Grow? Choose a Course That Fits Your Goals! The Adjudicating Authority held that the acid oil is a manufactured item and not a by-product and it is negligible for exemption under Notification No. 85/95-CE dated 18.05.1995. The authority also observed that the appellant is manufacturing both exempted products so they automatically become ineligible for the benefit under Notification No. 85/95-CE for the wastes and by-products. Aggrieved by this decision, the appellant appealed before the Commissioner (Appeals). The Commissioner (Appeals) upheld the Adjudicating Authority order confirming the duty demand of Rs. 3,30,320/- for November 2008. Aggrieved by the Commissioner (Appeals) order, the appellant appealed before the Customs, Excise & Service Tax Appellate Tribunal, Bangalore. The appellant’s counsel represented by S. Loknath argued that the by-products are eligible for exemption under Notification No. 89/95-CE which exempts waste, pairing, and scrap arising during the manufacture of exempted goods. The counsel relied on various case laws such as Ricela Health Foods Pvt. Ltd. & others Vs. CCE, Chandigarh, 2018, etc., where the by-products have been treated as waste and are eligible for exemption. Ready to Grow? Choose a Course That Fits Your Goals! The Commissioner of Central Excise counsel represented by Rajesh Shastry argued that the acid oil resulting from the additional processing of soap stock thus, it does not fall under the categories of waste, parings, or scrap as defined by Notification No. 89/95-CE. The counsel argued that the exemption to be limited to the goods, that emerge at the first processing of any goods, not acid oil resulting from further processing. Pullela Nageswara Rao (Technical Member) heard both sides and observed that similar by-products have been treated as waste and were eligible for exemption in previous cases such as Ricela Health Foods, Vinayak Agrotech, and Arihant Solvex. The tribunal ruled that the by-products (Acid oil, Fatty acid, Gums, and Waxes) generated during the oil refining process are eligible for the benefit of Notification 89/95-CE dated 18.05.1995, considering them as waste. The Tribunal thus allowed the appellant’s appeal.