CESTAT Bengaluru: Waste Products Not Excisable Goods

The Appellate Tribunal CESTAT Bengaluru ruled in favor of the appellant, setting aside the demands for excise duty on spent earth used in producing edible refined palm oil. The Tribunal highlighted the invalidity of Circular No.904/24/09-CX, emphasizing that mere amendment in the definition of excisable goods does not automatically classify waste products as excisable goods. The decision underscored the importance of aligning various sections of the Central Excise Act for such categorizations, overturning the earlier Tribunal decision and providing clarity on the classification of waste products under excise duty regulations.

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Issues:
Demand confirmation for spent earth used in manufacturing edible refined palm oil under excise duty due to amendment in definition of excisable goods.

Analysis:
The judgment by the Appellate Tribunal CESTAT Bengaluru concerns the confirmation of demands amounting to Rs. 4,29,885/- and Rs. 4,85,008/- for spent earth used in the production of edible refined palm oil from July 2010 to December 2012. The lower authorities imposed duty on these goods based on the amendment in the definition of excisable goods under Section 2(d) of the Central Excise Act, considering them as excisable goods since they are sold in the market. This decision was supported by Circular No.904/24/09-CX dated 28.10.2009, which classified waste products capable of being sold for consideration as excisable goods subject to excise duty.

However, it was highlighted that the Circular No.904/24/09-CX dated 28.10.2009 was invalidated by the Hon'ble High Court of Allahabad in the case of Balrampur Chini Mills Ltd. vs. UOI. Furthermore, the Hon'ble High Court of Bombay in the case of Hindalco Industries Ltd. vs. UOI reiterated the invalidity of the Circular, emphasizing that the amendment in Section 2(d) alone does not categorize waste or by-products as excisable goods unless corresponding changes are made in Section 2(f) defining manufacture. This led to the setting aside of the Larger Bench decision of the Tribunal in the case of Hindalco Industries Ltd.: 2014 (308 (E.L.T. 472) (Tri.-LB).

Consequently, the Tribunal found in favor of the appellant, acknowledging a strong prima facie case in their favor and allowing the stay petition unconditionally. The judgment serves as a significant clarification regarding the classification of waste products under excise duty regulations, emphasizing the necessity for alignment between different sections of the Central Excise Act for such categorizations.

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