Products Emerging During Refining Rice Bran Oil Are waste; No Excise Duty Payable: CESTAT
Pranav B Prem
The Hyderabad Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), comprising Angad Prasad (Judicial Member) and A.K. Jyotishi (Technical Member), has held that the products arising in the course of refining rice bran oil—namely Rice Bran Fatty Acid (R.B. Fatty Acid), Rice Bran Wax (R.B. Wax), and Rice Bran Gums (R.B. Gums)—are to be treated as waste. The Tribunal ruled that these items are not excisable goods and are eligible for the benefit of Notification No. 89/95-CE dated 18.05.1995, thus no excise duty is payable on such products.
Background
M/s Godavari Edible Bran Oil Pvt. Ltd., the appellant, is engaged in the manufacture of refined rice bran oil. During the refining process, the above-mentioned products emerge naturally. The central issue in this case arose from the department’s classification of these products as by-products liable to central excise duty, rather than as waste eligible for exemption. The adjudicating authority confirmed the demand of excise duty and imposed penalties on the appellant by rejecting the claim for exemption under Notification No. 89/95-CE, which exempts waste arising in the course of manufacture of exempted final products from duty. On appeal, the Commissioner (Appeals) set aside the penalty but sustained the demand for duty. Aggrieved by this order, the appellant approached the Tribunal.
Appellant’s Submissions
The appellant, represented by Shri B. Seshagiri Rao, Advocate, submitted that the issue was no longer res integra. They relied heavily on a catena of decisions which had settled this point of law:
Commissioner of Central Excise, Chandigarh-I Vs. Marico Ltd., [2022 (382) ELT 436 (SC)], where the Hon’ble Supreme Court upheld that such materials are waste and not excisable.
Ricela Health Foods Ltd. Vs. CCE, Chandigarh, Allahabad [2018 (361) ELT 1049 (Tri-LB)]
Kissan Fats Ltd. Vs. Commissioner of Central Excise, Chandigarh-II [2024 (387) ELT 369 (Tri-Cha)]
Final Order No. A/30062-30096/2019 dated 10.01.2019 passed by the Hyderabad Bench in a batch of similar cases.
The appellant asserted that these judgments clearly held that the products emerging during the refining of rice bran oil are nothing but waste. Thus, the exemption under Notification No. 89/95-CE was squarely applicable, and no excise duty was payable.
Respondent’s Contentions
The departmental representative, Shri V. Srikanth Rao, argued in line with the findings of the lower authority. The department maintained its position that the said products were by-products of value and were liable to duty. The department contended that such products are marketable and hence cannot be classified as waste for the purpose of exemption.
Tribunal’s Observations
The Tribunal noted that the question was a narrow one: whether the products like R.B. Fatty Acid, R.B. Wax, and R.B. Gums, which emerge during the process of refining rice bran oil, could be considered waste or by-products, and whether they were entitled to exemption under Notification No. 89/95-CE.
Upon examination of the judgments cited by the appellant, the Tribunal observed that the issue stood conclusively settled by higher judicial forums, including the Hon’ble Supreme Court. Particularly, the decision in Marico Ltd. clarified that such materials arising unavoidably in the course of refining do not assume the character of excisable goods, but are merely waste.
The Tribunal also referred to the decisions of coordinate benches—including those of the Hyderabad Bench itself—where similar products were consistently held to be waste and not subject to excise duty. Notably, in the appellant's own previous case, the Tribunal had ruled in its favour under the same notification. The Tribunal further noted that Notification No. 89/95-CE specifically grants exemption to waste and scrap arising in the manufacture of exempted goods, and that the department’s attempt to treat such waste as dutiable by-products was contrary to the settled position of law.
Decision
Considering the overwhelming judicial precedents and the nature of the products in question, the Tribunal held that the impugned order of the Commissioner (Appeals) was not legally sustainable. It set aside the order and allowed the appeal. The Tribunal clarified that the products arising during the refining of rice bran oil are to be treated as waste and are entitled to the benefit of Notification No. 89/95-CE. As a result, no excise duty is payable on these products.
Also Read: No Service Tax Is Payable On Amount Collected Towards Liquidated Damages: CESTAT
Verdict
The CESTAT Hyderabad Bench reaffirmed the legal position that products such as R.B. Fatty Acid, R.B. Wax, and R.B. Gums, which emerge as part of the rice bran oil refining process, are waste materials, not excisable goods. Consequently, the Tribunal allowed the appeal of M/s Godavari Edible Bran Oil Pvt. Ltd., setting aside the demand of excise duty and granting the benefit of the exemption notification. The appellant was granted relief with consequential benefits as per law.
Appearance
Shri B. Seshagiri Rao, Advocate for the Appellant.
Shri V Srikanth Rao, AR for the Respondent.
Cause Title: M/s Godavari Edible Bran Oil Pvt Ltd. V. Commissioner of Central Tax Visakhapatnam– GST
Case No: Excise Appeal No. 26628 of 2013
Coram: Hon’ble Mr. A.K. Jyotishi [Member (Technical)], Hon’ble Mr. Angad Prasad [Member (Judicial)]
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