2026 (1) TMI 848 - AT - Central Excise

By-products from manufacturing (fatty acids, gums, waxes) ruled non-dutiable; refund granted as no unjust enrichment

Whether by-products generated during manufacture (fatty acids, gums & waxes) are dutiable: Tribunal noted contrary precedents culminating in a Larger ... Denial of refund claims of the duty paid on clearance of Fatty Acids, Gums & Waxes, generated as waste products during the manufacture of Refined Rice Bran Oil - applicability of principles of unjust enrichment - HELD THAT:- The only ground raised by the Revenue in the grounds of appeal is that this issue has been decided by the Tribunal in favour of the department in the case of CCE vs. A.G. Fats Ltd & others [2011 (7) TMI 968 - CESTAT, NEW DELHI] which has held that the said by-products are dutiable as they have distinct commercial identity and value. This issue was again considered by the Tribunal in various cases and finally, in the Respondents’ own case, M/S RICELA HEALTH FOODS LTD., M/S J.V.L. AGRO INDUSTRIAL LTD., M/S KISSAN FATS LIMITED VERSUS CCE, CHANDIGARH, ALLAHABAD [2018 (2) TMI 1395 - CESTAT NEW DELHI - LB], the Larger Bench of the Tribunal has held that these products generated during the manufacture of the final product, are exempted from payment of duty. Unjust enrichment - HELD THAT:- The Respondents have produced the CA Certificate showing as to how much duty has been passed on the buyers and how much duty has been borne by themselves separately, which has been noted by the learned Commissioner (Appeals) also in the impugned OIAs. Though the learned Commissioner (Appeals) has directed the department to determine the extent of duty of incidence that has not been passed by the Respondents to its customers, within 15 days from the receipt of the impugned OIAs, but no contrary evidence has been brought forward by the department, therefore, the allegation of unjust enrichment is not sustainable in the present case. There are no merits in the appeals filed by the Revenue, hence, the same are dismissed. Issues: (i) Whether denial of refund of central excise duty paid on clearance of fatty acids, gums and waxes generated during manufacture of refined rice bran oil is justified; and (ii) Whether the claim for refund is barred by unjust enrichment where the incidence of duty may have been passed on to buyers.Analysis: The dispute turns on whether the products generated in the refining process constitute 'waste' eligible for exemption under Notification No. 89/95-CE dated 18.05.1995 or are dutiable by-products having distinct commercial identity. The legal framework includes Notification No. 03/2006-CE (exemption for refined rice bran oil) and Notification No. 89/95-CE (treatment of waste). Binding decisions of the Larger Bench of the Tribunal, affirmed by the Supreme Court, hold that products generated during manufacture of the final product are 'waste' and exempt under Notification No. 89/95-CE. Subsequent Tribunal and High Court decisions have followed that ratio. On unjust enrichment, the assessee produced certified evidence (CA certificate and invoices) showing the extent of duty borne and passed on; no contrary evidence was produced by the department despite directions to determine incidence, and established authorities require the department to produce contrary proof to rebut such evidence.Conclusion: (i) The denial of refund is not justified; the products in question are exempt as 'waste' under Notification No. 89/95-CE and refund claims are maintainable. (ii) The allegation of unjust enrichment is not sustained in the absence of contrary evidence. The appeals filed by the Revenue are dismissed and the refunds as directed by the appellate authority are upheld in favour of the assessee.