The Ahmedabad bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT)has held that spent earth arising out of the processing of oil is not liable to excise duty.
The issue involved in the present case is whether the spent earth arising in the process of oil refining, or bleaching process is classifiable under 15220090 of the Central Excise Tariff Act 1985 and consequently liable for Central Excise Duty.
Shri S.J. Vyas, Counsel, appearing on behalf of Awn Agro P Ltd, the appellant submitted that the issue is no longer res-Integra as per the Judgments, Nk Proteins Limited Versus C.C.E. & S.T., 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. Shri Ashok Thanvi, Superintendent (AR), appearing on behalf of the revenue reiterated the findings of the impugned order.
It was submitted that waste and by-products have different scopes and meanings. There is a clear distinction between these two. By-products emerge as an unavoidable outcome of a manufacturing process and do have significant commercial value. Waste on the other hand is such type of byproduct which is generally like rejects or refuse, fit to be discarded. They have little or no commercial importance. All products emerging during the main final products cannot be considered as waste, eligible for exemption under the said notification.
In effect, the processes undertaken by them are towards this intended final product. For producing refined rice bran oil, the gums and waxes available in the crude rice bran oil are to be removed by deguming and de-waxing. Thereafter by a process of deacidification/de-odourisation, by distillation, the refined oil is obtained.
On final process, fatty acid distillate (fatty acid with odour) is obtained as a waste. The process is to obtain refined rice bran oil by removing these unwanted products alongwith spent earth, which when present makes the oil crude refined oil.
While no general guidelines can be laid down to decide when a product will be treated as a waste or a by-product, in the present set of facts the products under consideration are not like by-products emerging during manufacture. The process of manufacturing refined vegetable oil is essentially by removing the unwanted materials that were present in the crude vegetable oil so that refined vegetable oil can be obtained. In this process of refining, the unwanted materials are removed.
A two-member bench comprising Mr Ramesh Nair, Member (Judicial) and Mr. C L Mahar, Member (Technical) observed 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. The process of manufacture is for refined rice bran oil. As such, we note that these Incidental products are nothing but waste arising during refining of rice bran oil and applying the ratio of Apex court, as discussed above, these cannot be considered as manufactured excisable goods.”
Further held that “the spent earth arising out of the processing of oil is not liable to duty in terms of Notification No. 89/95-C.E. dated 18-05-2019. Following the above decisions and the decision cited by the Learned Counsel, we are of the view that the demand is not sustainable.”
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