2026 (1) TMI 509 - AT - Central Excise

Waste mud from crude palm oil bleaching-whether 'excisable goods' for central excise duty; demand set aside, appeal allowed.

The dominant issue was whether waste mud (spent fuller earth) arising during bleaching of crude palm oil was 'excisable goods' liable to central excise ... Chargeability to Excise Duty - waste mud (spent earth) - applicability of amendment in section 2 of Central Excise Act, 1944, whereby, certain explanation was inserted to decide as to what would be treated as ‘excisable goods’ - HELD THAT:- It is found that the department has mainly relied on the circular dt.28.10.2009 issued by the CBIC to treat such goods as excisable goods, whereas, the Board themselves have, vide their circular dt.25.04.2016, inter alia, directed that certain items like bagasse, dross and skimming’s of non-ferrous metals or any such by-product or waste, which are non-excisable goods and are cleared for a consideration from the factory need to be treated like exempted goods for the purpose of reversal of credit of input and input services, in terms of Rule 6 of Cenvat Credit Rules (CCR), 2004. This was in view of certain amendments made in Rule 6 of CCR, 2004 w.e.f. 01.03.2015. Therefore, it is an undisputed fact that the directions contained in various circulars including Circular No.904/24/09-CX dt.28.10.2009, were withdrawn and rescinded. In the present case, it is not in dispute that the spent fuller earth has not emerged by way of any conscious effort and it has emerged involuntarily in the process of bleaching the crude palm oil and that the said emergence called waste mud (spent earth) during the course of bleaching. It is also not disputed that the adjudicating authority has relied on clarification issued vide circular dt.28.10.2009 to hold said waste mud as excisable good - there are also force in the judgments cited by the appellant, wherein, the demands have been dropped taking into account the rescindment of said circular. There is an omnibus N/N.89/1995-CE dt.18.05.1995, which exempts all waste, parings and scrap arising in the course of manufacture of exempted goods and falling within the Schedule to the Central Excise Tariff Act, 1985, from the whole of the duty of excise. There are merit in the appeal filed by the appellant and accordingly, the impugned order is set aside - appeal allowed. Issues: Whether the spent fuller earth (waste mud) generated during the bleaching operation is chargeable to excise duty.Analysis: The determination turns on the statutory definition of 'excisable goods' and the legal characterisation of the material produced. The relevant statutory framework includes the amended clause in Section 2(d) of the Central Excise Act, 1944 defining excisable goods and the treatment of by-products/waste under the Central Excise Tariff Act, 1985 (Schedule). Administrative guidance previously issued in Circular No.904/24/09-CX dated 28.10.2009, which treated such waste as excisable, was later withdrawn by CBIC in Circular No.1027/15/2016-CX dated 25.04.2016 and read in the context of amendments to Rule 6 of the Cenvat Credit Rules, 2004 (effective 01.03.2015). There is a statutory exemption in Notification No.89/1995-CE dated 18.05.1995 for waste, parings and scrap arising in the course of manufacture of exempted goods. The material in question (spent fuller earth) emerged involuntarily in the bleaching process and was not produced by a conscious manufacturing effort to create a marketable product. Given the rescindment of the earlier circular and the statutory exemption for waste, the administrative basis for treating the spent earth as excisable is no longer operative; Rule 6 and the Board's later directions govern treatment for Cenvat reversal and exempt status.Conclusion: The spent fuller earth (waste mud) generated during bleaching is not chargeable to excise duty and the impugned order confirming duty is set aside.