The Chandigarh Bench of Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ) allowed exemption on wax, gums, and fatty acids arising from vegetable oil refining, treating them as “waste” under Notification No. 89/1995-CE.

Raj Agro Mills Ltd, appellant-assessee,, was engaged in manufacturing refined oil, vanaspati ghee, and fatty acid. During the process, by-products like waxes, gums, and soap stocks were generated and cleared at Nil duty, claiming them as ‘waste’ under Notification No. 89/95-CE dated 18.05.1995.

However, authorities found these were not ‘waste’ but by-products with distinct identity and market value, making them liable to duty at the applicable tariff rate. Six show cause notices were issued, demanding ₹1,07,55,973 in duty under Section 11A, along with interest and an equal penalty.

The adjudicating authority confirmed the demand, interest, and penalty. On appeal, the Commissioner (Appeals) allowed benefit of cum-duty price and set aside the penalty, but upheld the duty and interest. The assessee then filed the present appeal before the tribunal.

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The assessee counsel argued that the issue had already been settled in favour of the assessee in similar cases. He referred to the Larger Bench decision in M/s Ricela Health Foods Ltd., where the tribunal held that exemption under Notification No. 89/1995-CE dated 18.05.1995 was available for waste arising during the manufacture of exempted goods.

He also cited the tribunal’s decision in Dhillon Oil and Fats Pvt. Ltd., dated 21.12.2023, where the same exemption was allowed by relying on the Larger Bench ruling.

The departmental representative supported the findings of the impugned order.

The two member bench comprising S.S.Garg (Judicial Member) and P.Anjani Kumar (Technical Member) found that the issue was already settled by the Larger Bench in the Ricela Health Foods Ltd. case, which held that gum, wax, and fatty acids generated during the refining of vegetable oils were waste and qualified for exemption under Notification No. 89/1995-CE.

It also noted that the Chandigarh Bench, in the Dhillon Oil and Fats Pvt. Ltd. case, had followed the same view and allowed the exemption.

Based on these decisions, the CESTAT held that the denial of exemption was not justified, set aside the impugned order, and allowed the appeal with consequential relief as per law.

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