Excise Appeal No.11584 of 2013
(Arising out of OIA-46-2013-AHD-III-SKS-COMMR-A-AHD dated 15/03/2013 passed by
Commissioner of Central Excise-AHMEDABAD-III)
Adani Wilmar Ltd
VERSUS
C.C.E. & S.T.-Ahmedabad-iii
APPEARANCE:
Shri S J Vyas, Advocate for the Appellant
Shri Prakash Kumar Singh, Superintendent (AR) for the Respondent
CORAM: HON’BLE MEMBER (JUDICIAL), MR. RAMESH NAIR
HON’BLE MEMBER (TECHNICAL), MR. RAJU
Final Order No. A/ 10237 /2023
DATE OF HEARING: 27.01.2023
DATE OF DECISION: 07.02.2023
RAMESH NAIR
The issue involved in the present case is that whether the appellant is
liable to pay excise duty on spent earth arising out of the refined vegetable
oil.
- Shri S J Vyas, learned counsel appearing on behalf of the appellant
submits that the very same issue has been settled by CESTAT- Hyderabad in
the case of M/s. PRIYANKA REFINERIES PVT LTD UNIT II- 2019 (7) TMI 249.
He also placed reliance on the decision in the case of M/S. RICELA HEALTH
FOODS LTD., M/S. J.V.L. AGRO INDUSTRIAL LTD., M/S. KISSAN FATS
LIMITED- 2018 (2) TMI 1395-CESTAT NEW DELHI.
- Shri Prakash Kumar Singh, learned Superintendent (AR) appearing on
behalf of the revenue reiterates the finding of the impugned order.
- We have carefully considered the submissions made by both the sides
and perused the records. We find that the issue to be decided is that during
the course of manufacture of vegetable refined oil which is exempted, the
emergence of spent earth is liable to excise duty or otherwise. We find that
the very same issue has been considered by this tribunal in the case of M/s.
PRIYANKA REFINERIES PVT LTD UNIT II (supra) wherein, the tribunal has
passed the following order:-
- We have considered the arguments on both sides and find that the
issue in hand is identical to the issue before the Larger Bench of the
Tribunal in the case of Ricela Health Foods Ltd (supra). The short point
to be decided is whether the fatty acids/ wax/ gums, etc., which arise
while crude vegetable oil is refined should be considered as waste or as
by- product. If these are considered as waste, they are covered by
exemption notification 89/1995-CE. If, on the other hand, these are
considered as by-products, as asserted by the department, they are not
entitled to the benefit of this notification. The matter has been decided
by the Larger Bench of the Tribunal in Ricela Health Foods (supra) and
it has been held that these products are not intentionally manufactured
but only arise during the process of refining of crude vegetable oil and
therefore should be considered as waste and they are entitled to the
benefit of exemption notification 89/1995-CE. Respectfully following the
decision of the Larger Bench, we hold that the impugned order is
unsustainable and liable to be set aside and we do so.
- The appeal is allowed and the impugned order is set aside.
The same issue has been considered by CESTAT- New Delhi in the case of
M/S. RICELA HEALTH FOODS LTD., M/S. J.V.L. AGRO INDUSTRIAL LTD.,
M/S. KISSAN FATS LIMITED (supra) wherein, the tribunal has observed as
under:-
- We have heard the learned counsels for the appellants. The learned
counsels submitted on the process undertaken by the appellants
starting from the receipt of crude rice bran oil. The following flow chart
was presented to explain the process:-
The learned Counsel mainly submitted on the following lines:-
(a) the products, in question, are essentially inevitable waste, which
the appellant never intended to manufacture and, as such, cannotbe
considered as a result of manufacturing process;
(b) without prejudice to the above, the products, in question, are
clearly exempted under Notification 89/95- CE. The Revenue itself
contends that wax, fatty acid and gums are waste arising during the
course of refining of vegetable oil;
(c) no reliance can be placed on the order of the Tribunal in A.G. Fats
(supra) as the same is devoid of legal basis and is incorrect in law. The
said decision departed from many rulings of the Tribunal earlier. The
reference made by the Tribunal in A.G. Fats (supra) to the decision of
CCE, Hyderabad vs. Priyanka Refineries Ltd. – 2010 (249) E.L.T. 70
(Tri. Bang.) is factually incorrect. The said decision of the Tribunal in
Priyanka Refineries (supra) has been affirmed by the Apex court by
dismissing the civil appeal Nos. 219-220 of 2010 filed by the Revenue
reported in 2011 (274) E.L.T. A16 (S.C.). This was wrongly referred to
as dismissal of SLP. The Tribunal noted the dismissal of civil appeal by
the Apex court incorrectly as dismissal of SLP;
(d) the order of the Hon’ble Supreme Court affirming the decision of
the Tribunal in A.G. Fats (supra) by dismissing the civil appeal will not
form a binding precedent in view of similar dismissal of civil appeal
against a contrary decision in Priyanka Refineries (supra). Thus, there
exist two decisions of co-equal Benches on the same Issue. The Larger
Bench of the Tribunal, now seized of the matter, should take a view
which correctly reflects the legal position. Reliance was placed on the
decision of Hon’ble Calcutta High Court In New India Assurance Co. Ltd.
– AIR 2004 CAL 1.
- The learned Counsel reiterated that the Larger Bench is deciding
only on the reference made by the Excise Division Bench and, as such,
the other connected disputes with reference to classification, valuation,
Cenvat credit, penalty etc. would have to be decided by the appropriate
Division Bench after the decision of the Larger Bench on the referred
dispute.
- The learned AR submitted that waste and by-product have
different scope and meaning. There is a clear distinction between these
two. By- products emerge as unavoidable outcome of a manufacturing
process and do have significant commercial value. Waste on the other
hand is such type of by-product which is generally in the nature of
rejects or refuse, fit to be discarded. They have little or no commercial
importance. All products emerging during the course of main final
products cannot be considered as waste, eligible for exemption under
the said notification.
- We have heard both the sides and perused the appeal record to
examine the reference made by the Division Bench. Since the
appellants submitted on the excisability itself the first point for decision
is the excisability of the products, in question. The appellants strongly
contended that even before examining the admissibility of exemption
under Notification 89/1995-CE, the point to be decided is the
excisability of the product, in question. It is the case of the appellant
that if it can be established that these goods are not manufactured
goods then the question of levy itself will not arise. It is contended that
the product, in question, are unwanted/inevitable waste. The value
realized by the appellants on such unintended waste by sale, itself is
not a criteria to decide the excisability. The Hon’ble Supreme Court in
CCE vs. Indian Aluminium Company 2006 (203) E.L.T. 3 (S.C.) held
zinc dross and flux skimming are not eligible to central excise duty.
Relying on the earlier decisions in Union of India vs. Indian Aluminium
Company Ltd. 1995 (77) E.L.T. 268 (S.C.) and CCE, Patna vs. Tata Iron
& Steel Company Ltd.. – 2004 (165) E.L.T. 386 (S.C.), the Apex court
held that the dross and skimming arising during the course of
manufacture of metal cannot be subjected to excise levy only because
it may have some saleable value, observing that the term “manufacture
implies a change; every change, however, is not a manufacture”. Every
change of an article may be the result of treatment, labour and
manipulation. The manufacture would Imply something more. There
must be a transformation; a new and different article must emerge
having a descriptive name, character or use (Delhi Cloth and General
Mills Company Ltd. – AIR 63 SC 791). The Apex court categorically held
that dross do not answers the description of “waste and scrap”.
- In view of the ratio adopted by the Apex court while arriving at the
above decisions, the point for consideration in the present dispute is
the gums, waxes and fatty acid that emerge as a by-product can be
considered as a products arising out of a manufacturing process. The
appellants are engaged in converting crude rice bran oil into refined rice
bran oil. In effect the processes undertaken by them are towards this
intended final product. For producing refined rice bran oll, 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. In this final
process fatty acid distillate (fatty acid with odour) is obtained as a
waste. As can be seen the gums, waxes and fatty acid distillate are
emerging due to removal/refining process of crude rice bran oil. As
already noted the process is to obtain refined rice bran oil by removing
these unwanted products alongwith spent earth, which when present
makes the oil as crude refined oil.
- The thrust of the arguments by the Revenue is that when a
product is capable of being sold for a significant consideration the same
cannot be considered as waste. We are unable to accept such summary
presumption. Admittedly, in chemical and metallurgical industry when
the raw materials are processed with an intended purpose of
manufacturing certain final products by a chemical reaction, refining,
melting etc. multiple products will result. These products either
emerged in the final stage or any of the intermediating stages also. The
point for consideration is whether these are to be considered as
manufactured goods for excise levy based on the statutory definition
for manufacture or should be considered as manufactured goods based
on the likely value they may command while selling. We are clear that
the value that a product may or may not fetch cannot be a
determinative factor to decide whether the same is a manufactured
final product/by product or a waste/refuse arising during the course of
manufacture of final products. This much is clear from the ratio of the
Apex court decision in Indian Aluminium Co. (supra). 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 clearly not in the nature of by products emerging
during the course of 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 a refined vegetable oil
can be obtained. In this process of refining, the unwanted materials are
removed. Hence, we are of the considered view 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 course of refining of rice bran oil
and applying the ratio of Apex court, as discussed above, these cannot
be considered as manufactured excisable goods. Noting that the
reference is to decide whether these are to be treated as waste for the
purpose of exemption Notification 89/95-CE we note though the
excisability of the product itself is seriously in dispute as per the
opinion expressed by us, as above, these cannot be considered as
anything other than waste and as such will be covered by the
exemption Notification No. 89/95-CE. This has been pleaded as a
alternate argument by the appellant/assessee also.
- As such in view of the above discussion and finding, we note that
the appellant/assessee are eligible for exemption under the said
notification.
- The appeal files are returned, with the above findings, to the
regular Division Bench for decision on the points raised in the
respective appeals.
- In view of the above judgment which are on the identical issue and on
the same product, the issue is no longer res-integra accordingly, the
impugned order is set aside. Appeal is allowed.
(Pronounced in the open court on 07.02.2023)
(RAMESH NAIR)
MEMBER (JUDICIAL)
(RAJU)
MEMBER (TECHNICAL)
Leave a Reply