2006 (3) TMI 3 - AT - Central Excise

Tribunal rules soap stock and acid oil are by-products exempt from duty under Cenvat Credit Rules

The Tribunal upheld the Commissioner (Appeals) order, determining that soap stock and acid oil are bye products in the manufacturing of refined edible oil ... Cenvat credit — Rule 6 of Cenvat Credit Rules, 2002 - Soap stock and Acid oil - arising dqring manufacture of refined edible oil - to be treated as bye-product and not exempted final product Issues:1. Applicability of Rule 12 of the Cenvat Credit Rules, 2002 on exempted products like soap stock and acid oil.2. Classification of soap stock and acid oil as final product or bye product during the manufacture of refined edible oil.3. Interpretation of relevant case laws and CESTAT decisions regarding the liability to pay duty on exempted products.Analysis:Issue 1:The appellants, engaged in manufacturing refined edible oil, availed Cenvat credit on inputs and capital goods. The dispute arose when the authorities issued a Show Cause Notice demanding payment equal to 8% of the value of exempted products like soap stock and acid oil under Rule 12 of the Cenvat Credit Rules, 2002. The lower authorities confirmed the demand, imposed a penalty, and required payment of interest. However, the Commissioner (Appeals) set aside the order, stating that soap stock and acid oil were only bye products, not subject to Rule 12, relying on relevant case law.Issue 2:The crux of the matter was whether soap stock and acid oil should be considered final products or bye products during the manufacture of refined edible oil. The appellants argued that soap stock and acid oil were final products, not subject to Rule 12, citing a Tribunal decision related to similar products. Conversely, the respondents contended that soap stock and edible oil were indeed bye products arising during the manufacturing process of refined oil, relying on precedents involving waste products in other industries like paper and sugar.Issue 3:Examining the submissions, the Tribunal found that the case law cited by the authorities was not relevant as it concerned situations where both intermediate and final products were exempted from duty. In the present scenario, since the finished product, refined edible oil, was dutiable, the appellants could not be held liable to pay duty on soap stock and acid oil under Rule 57CC. The Tribunal upheld the Commissioner (Appeals) order, dismissing the appeal for lacking merit and aligning the decision with relevant CESTAT precedents.In conclusion, the Tribunal's judgment clarified the classification of soap stock and acid oil as bye products in the manufacturing process of refined edible oil, thereby determining the applicability of duty payment rules on exempted products.