TMI Blog2011 (7) TMI 968X X X X Extracts X X X X X X X X Extracts X X X X ..... by-products, soap stock/fatty acids, waxes and gums are the manufactured products covered by Central Excise Tariff and since it is not under dispute that the same are marketable, the same have to be treated as excisable product chargeable to Central Excise Duty. A distinction has to be made between the term ‘by-product’ and the term ‘waste.’ - 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 - Held that: 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 - Decided against the assessee - E/555, 1858, 2168, 2169-2170, 2171-2172, 2173-2174/2008 and 1121, 2611-2614/2010 - 648-661/2011-EX(PB) - Dated:- 25-7-2011 - Justice R.M.S. Khandeparkar, Shri Rakesh Kumar, JJ. REPRESENTED BY : S/Shri B.K. Singh, Jt. CDR and Sunil Kumar, DR, for the Department. S/Shri S. Malhotra, Kamaljeet Singh, N.K. Garg, G.S. Sandhe, for the Assessee. [Order per : Rakesh Kumar, Member (T)]. Since the issue involved in these appeals is common, the same were heard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctured. As per explanation to this notification, for the purpose of this notification, the expression exempted goods means excisable goods which are chargeable to nil rate of duty or are fully exempt from excise duty by any exemption notification not being a notification where the exemption from the whole of the duty of excise is granted based on the value or quantity of clearances made in a financial year. The point of dispute in this case is as to whether the fatty acids/soap stock, waxes and gums obtained in course of refining of the vegetable oils are eligible for duty exemption under the Notification No. 89/95-C.E. 2. Heard both the sides. 2.1 Shri S. Malhotra, Advocate, representing M/s. A.G. Fats Ltd., Shri K.J. Singh, Advocate, representing M/s. A.P. Solvex Ltd. and A.P. Organics (P) Ltd. and Shri N.K. Garg, advocate, representing M/s. Dhillon Oil Fats P. Ltd. and M/s. Shree Jindal Proteins Ltd. made the following oral and written submissions. (1) It is a statutory obligation of the manufacturers of refined vegetable oil and vanaspati to remove free fatty acids, gums and waxes, as these substances are toxic substances. Thus, the gum, waxes and fatty acids obtai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in 2004 (165) E.L.T. 386 (S.C.) has held that zinc dross, flux skimming and zinc scallings are waste products and not excisable goods although these were arising in course of galvanisation of steel sheets as by-product. The ratio of these judgments is squarely applicable to the facts of this case. (5) Hon ble Supreme Court in the case of Shyam Oil Cake Ltd. v. CCE, Jaipur reported in 2004 (174) E.L.T. 145 (S.C.) has specifically held that refining of vegetable oil does not amount to manufacture. Subsequently a new Chapter Note was added to Chapter 15 vide Finance Act, 2005 to provide that the process of refining of vegetable oil of heading 1507 to 1515 amounts to manufacture. But this deeming provision would not be applicable to the other products - gums, waxes and fatty acids obtained in course of refining of oil and, hence, these products, in any case, are not excisable. (6) The soap stock/fatty acids, waxes and gums are fractions of 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. and its successor notification, no duty is chargeable on these items. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent s SLP against the Tribunal s order in the case of CCE, Hyderabad v. Priyanka Refineries Ltd. (surpa) is not a binding precedent, as the same is summary dismissal of appeal without assignment any reasons, that during the period prior to 1-3-06. Notification No. 115/75-C.E. was there which exempted the excisable goods manufactured in the factories belonging to certain industrial sectors mentioned therein, one of the industrial section mentioned being oil industry and during that period the respondent in appeals at Sl. No. 1 to 6 and the appellants in appeals at Sl. No. 7 8 were availing of the exemption Notification No. 115/75-C.E. in respect of fatty acids/soap stock, gums and waxes and were not claiming that these goods are waste, that it is only as soon as the Notification No. 115/75-C.E. was withdrawn w.e.f. 1-3-06, the assessees in this group of cases have started claiming the fatty acids/soap stock, gums and waxes as waste eligible for duty exemption under Notification No. 89/95-C.E., that fatty acids obtained in course of refining of vegetable oils are specifically covered by heading 382300 of the Central Excise Tariff, that Hon ble Allahabad High Court in the case of So ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntained in this notification shall apply to waste, parings and scrap cleared from a factory in which any other excisable goods other than exempted goods are also manufactured. Explanation - For the purpose of this notification, the expression exempted goods means excisable goods which are chargeable to Nil rate of duty or, are exempted from the whole of the duty of excise leviable thereon by any other notification (not being a notification where exemption from the whole of duty of excise is granted based upon the value or quantity of clearance made in a financial year) issued under sub-rule (1) of rule 8 of the Central Excise Rules, 1944 or sub-section (1) of section 5A of the said Act. 3.3 From the reading of the above notification, it is clear that the following conditions must be satisfied for exemption under this notification :- (i) the goods must be waste, parings and scrap; (ii) the goods must be falling within the schedule to the Central Excise Tariff Act; (iii) the waste, parings and scrap must have arise in course of manufacture of excisable goods which are exempted goods i.e. goods chargeable to nil rate of duty or the same are fully exempt from d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o. 7 8, that by virtue of Chapter Note 6 to Chapter 15, only the refined oil is to be treated as manufactured product and not the by-products obtained in course of refining is difficult to accept. When a particular process is a process of manufacture under Section 2(f) by virtue of some Chapter Note, not only the main product but all the by-products obtained by that process would have to be treated as manufactured product and if the same are covered by some entry in the Central Excise Tariff and are marketable the same would be chargeable to Central Excise Duty. The waxes and gums obtained in course of refining is covered by heading 1522. As regards soap stock, the same would also be covered by Heading 1522, as, as per HSN Explanatory Notes of heading 1522, this heading among other things, covers soap stocks which are the by-product of oil refining, produced by neutralisation of free fatty acids with a base (sodium hydroxide) and consist of mixture of crude soap, natural oils or fats. As regards, fatty acids obtained in course of refining, the same by virtue of Chapter Note 1(e) to Chapter 15 are excluded from the purview of Chapter 15 and the same are specifically covered by Hea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ries Ltd. (supra) has held that soap stock arising in course of refining of oil is waste, no reasons have been given for arriving at this conclusion. In this order, the observations of the Tribunal that the decision of Hon ble Supreme Court in the case of Khandelwal Metal Engineering Works v. Union of India reported in 1985 (20) E.L.T. 222 (S.C.) would cover the issue in favour of the respondent are also not correct as the issue involved in the case of Khandelwal Metal Engineering Works was as to whether the imported brass scrap in form of old and used articles of brass sold as scrap, would attract additional custom duty under Section 3 of the Indian Customs Tariff Act, while the issue involved in the case of CCE, Hyderabad v. Priyanka Refineries Ltd. (supra) was as to whether the soap stock arising in course of refining of crude vegetable oil could be treated as waste for the purpose of Notification No. 85/95-C.E., which is a totally different issue. Just because the appeal filed by the Government against this order of the Tribunal has been dismissed by Hon ble Supreme Court, the dismissal being a summary dismissal without giving any reasons does not lay down any law as, as he ..... X X X X Extracts X X X X X X X X Extracts X X X X
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