Incidental refinery residues are not excisable goods when they arise as waste during manufacture of refined oil.

Fatty acid, soap stock and spent earth arising incidentally during the refining of oil are treated as waste from manufacture, not as excisable goods. Where the intended process is production of refined oil and the disputed materials emerge only as unwanted residues, their possible marketability or sale value does not by itself make them manufactured goods liable to central excise duty. Applying the Larger Bench view, such incidental outputs are not independently manufactured for excise purposes, so the duty demand was unsustainable.

---

---

Issues: Whether fatty acid, soap stock and spent earth emerging during the manufacture of refined oil are waste or excisable goods liable to duty.

Analysis: The process undertaken was for obtaining refined oil, and the disputed materials arose only as incidental residues during the refining process. Their marketability or possible sale value was not treated as decisive for excisability. Applying the Larger Bench view, such incidental outputs arising from removal of unwanted materials in the course of refining do not constitute manufactured excisable goods.

Conclusion: The disputed items were held to be waste arising during manufacture and not liable to central excise duty; the demand was unsustainable.

Ratio Decidendi: Residues arising incidentally during a refining process, where the intended manufacture is of the refined product and not of the residues themselves, are not manufactured excisable goods merely because they may have sale value.

---