‘ Acid Oil ’ arises during Conversion of ‘ Soap Stock ’ is Excisable Product: CESTAT [Read Order]

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Chennai bench has held that the acid oil emerges during the conversion of soapstock is an excisable product through the ‘soap stock’, which emerges during the course of refining of vegetable oil is not ‘excisable.’

The appellants, in the instant case, are procuring crude vegetable oil from various mills and refining the same in their factory. During this process, refined vegetable oil is obtained as a main product and soap stock as a by-product. Soapstock is further converted to Acid Oil and Soap Sludge and cleared to various soap manufacturers without payment of duty. The department was of the view that these products are subject to excise duty.

The Tribunal bench noticed the decision of the Larger bench in Ricela Health Foods Ltd wherein it was held that the items which have arisen during the course of refined oils such as Fatty acids, Soap stock, Spent earth and arising in the course of manufacture refined oil are not excisable products since they are unintended products arising during the course of refining of edible oil are nothing but waste.

Regarding the excisability on the Acid Oil’ and ‘Soap Sludge’ which are obtained by further conversion of such Soap Stock, the Tribunal noted that “discernably, in the first instance, during the refining of various vegetable oils, soap stock was an unintended by product. As we mentioned earlier, the ratio of the Apex Court in Indian Aluminium Company (supra) and of the various Tribunal’s decisions like Ricela Health Foods Ltd. (supra) and others would squarely apply with regard to ‘soap stock’, hence it cannot be held as excisable goods and denied benefit of Notification No.89/95-CE. However, as per the facts on record, Soap Stock is then consciously again processed by the appellants which results in emergence of Acid Oil and Soap Sludge. It then cannot be said that emergence of acid oil is an unintended by product.”

Based on the above findings, the Tribunal held that “the acid oil is an intended final product resulting out of the conscious process of soapstock. The said acid oil would then have to be considered as a new product with a different name, character and use, and exigible to excise duty as applicable. To this extent, we find no infirmity in the upholding of duty liability on this score.”