2026 (2) TMI 559 - AT - Central Excise

Excise liability on refinery by-products: precedent that saleability alone does not create manufacture, appeal allowed overturning duty demand

Whether excise duty attaches to by-products and residues generated during refining of edible oil is governed by the test whether those materials amount to ... Liability to pay excise duty on by-products and residues - manufacture for excise purposes - Classification under Central Excise Tariff heading 1522 00 20/90 - precedential effect of earlier Tribunal and Supreme Court rulings - Whether the appellant M/s Priyanka Refineries Private Ltd., Unit II is liable to pay excise duty on sunflower mud, soap stock, gums, wax, fatty acids, spent earth and similar residues which arise in the process of refining of crude sunflower oil into refined oil. - HELD THAT:- The appellant refines crude sunflower oil and produces refined oils and in the process these products emerge. The case of the Department is that the appellant is liable to pay on excise duty of these products fall under Central Excise Tariff heading 1522 00 20/90 of the Central Excise Tariff. We find that in the appellant’s own case, a Co-ordinate of this Tribunal has, in the case of Commissioner Vs Priyanka Refineries Ltd.[2009 (5) TMI 419 - CESTAT, BANGALORE], held that mere saleability of the waste product does not make it a manufacture product and therefore no Central Excise Duty was payable on the same. This decision was affirmed by the Supreme Court by dismissing the civil appeal filed by the Revenue in [2010 (1) TMI 1167 - SC ORDER] by this Bench in Priyanka Refineries Pvt Ltd., Unit-II Vs CCE, Hyderabad [2019 (7) TMI 249 - CESTAT HYDERABAD]. Thus, we allow the appeal and set aside the impugned order. Issues: Whether residues and by-products (sunflower mud, soap stock, gums, wax, fatty acids, spent earth and similar residues) arising during refining of crude sunflower oil into refined oil are liable to excise duty under Central Excise Tariff heading 1522 00 20/90.Analysis: The Tribunal examined whether the residues produced in the refining process qualify as a manufacture attracting Central Excise duty or remain waste/by-products not subject to excise. The Tribunal relied on prior coordinate authority and subsequent appellate treatment which held that mere marketability or saleability of a waste product does not convert it into a manufactured excisable product. That precedent was treated as applicable to the facts where the materials in question emerge incidentally from the refining process and were held not to be manufactured goods for purposes of Central Excise duty.Conclusion: The residues and by-products arising from the refining process are not subject to Central Excise duty under the cited tariff heading; the appeal is allowed and the impugned order is set aside.