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 duty. The Tribunal held that the waste emerged involuntarily without any conscious manufacture, and the demand was founded on a CBIC circular later withdrawn/rescinded; subsequent Board instructions treated comparable by-products/waste as non-excisable for duty purposes, with only Rule 6 CCR consequences. Further, a general exemption notification covered waste/scrap arising in manufacture of exempted goods. Consequently, the impugned duty demand and order were set aside and the appeal was allowed.

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1. ISSUES PRESENTED AND CONSIDERED

(i) Whether "waste mud / spent earth (spent fuller earth)" arising involuntarily during bleaching of crude palm oil is chargeable to central excise duty as "excisable goods" on the basis of the post-Budget 2008 amendment to the definition in Section 2(d) of the Central Excise Act, 1944, when the departmental case rests primarily on the CBIC circular dated 28.10.2009.

(ii) Whether the demand treating such waste/by-product as excisable is unsustainable in view of the subsequent withdrawal/rescission of the CBIC circular dated 28.10.2009 and the Tribunal's acceptance that similar demands were dropped after such rescission.

(iii) Whether, even otherwise, the said waste mud/spent earth is covered by the exemption for waste under Notification No. 89/1995-CE dated 18.05.1995, thereby negating duty liability.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (i) & (ii): Excisability of waste mud/spent earth based on Section 2(d) amendment and reliance on CBIC circular dated 28.10.2009

Legal framework (as discussed by the Tribunal): The Tribunal noted that the department's case proceeded on the amendment in Section 2(d) of the Central Excise Act, 1944 (Budget 2008), read with departmental reliance on the CBIC circular dated 28.10.2009 for treating such waste/by-product as "excisable goods". The Tribunal also considered the Board's subsequent circular dated 25.04.2016 stating that certain by-products/waste cleared for consideration are "non-excisable goods" and that earlier circular directions including the circular dated 28.10.2009 stood withdrawn/rescinded.

Interpretation and reasoning: The Tribunal found that the adjudicating authority's conclusion of excisability was founded on the clarification in the CBIC circular dated 28.10.2009. It recorded as undisputed that the spent fuller earth/waste mud did not emerge by any "conscious effort" and arose involuntarily during the bleaching process. The Tribunal further treated as material that the Board itself later rescinded the earlier circular guidance, and that the subsequent Board position (circular dated 25.04.2016) treated comparable by-products/waste as "non-excisable goods". The Tribunal accepted the appellant's reliance on decisions where similar demands were dropped considering the rescission of the 28.10.2009 circular, and held that the departmental foundation for the demand (the rescinded circular-based approach) could not sustain the levy.

Conclusion: The Tribunal held that the demand premised on treating waste mud/spent earth as excisable goods on the strength of the circular dated 28.10.2009 was not sustainable, particularly in light of the circular's withdrawal/rescission and the fact that the waste arose involuntarily without conscious manufacture.

Issue (iii): Applicability of exemption for waste under Notification No. 89/1995-CE dated 18.05.1995

Legal framework (as discussed by the Tribunal): The Tribunal identified an "omnibus" exemption under Notification No. 89/1995-CE dated 18.05.1995 exempting "all waste, parings and scrap" arising in the course of manufacture of exempted goods and falling within the relevant Schedule, from the whole of the duty of excise.

Interpretation and reasoning: Having found the waste mud/spent earth to be a waste arising during the manufacturing process, the Tribunal treated the existence of this omnibus waste exemption as reinforcing the lack of duty liability on the impugned clearances. The Tribunal expressly relied on this notification as an additional decisive consideration supporting the appellant.

Conclusion: The Tribunal concluded that the waste mud/spent earth was covered by the waste exemption under Notification No. 89/1995-CE dated 18.05.1995, providing an additional ground to set aside the duty demand.

Final determination

On the above grounds, the Tribunal found merit in the appeal and set aside the impugned order, allowing the appeal and holding that excise duty demand on waste mud/spent earth was unsustainable.

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