Excise duty on refining waste rejected as incidental outputs from vegetable oil refining qualified for exemption.

Fatty acids, wax, gums and spent earth arising during the refining of vegetable oil were treated as incidental waste rather than excisable manufactured goods, because the refining process was directed to obtaining refined oil and the removed materials did not themselves undergo a separate manufacturing process. Their mere saleability was held insufficient to establish excisability. On that basis, these outputs were held to fall within Notification No. 89/1995-CE dated 18.05.1995, and exemption was available in respect of the goods generated in the refining process.

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Issues: Whether fatty acids, wax, gums and spent earth generated in the course of refining vegetable oil were liable to excise duty, and whether they were covered by Notification No. 89/1995-CE dated 18.05.1995.

Analysis: The Tribunal followed the Larger Bench view that the process of refining crude vegetable oil is directed towards obtaining refined oil, and the unwanted materials removed in that process do not themselves undergo a manufacturing process so as to become excisable goods. Their saleability was held not to be determinative of excisability. The Tribunal treated such incidental outputs as waste arising in the course of manufacture rather than manufactured by-products, and held that they fell within the scope of the exemption notification.

Conclusion: The assessees were entitled to exemption under Notification No. 89/1995-CE dated 18.05.1995 in respect of fatty acids, wax, gums and spent earth generated during refining, and the Revenue's challenge failed.

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