M/S. Amrit Banaspati Co. Ltd. Vs. Cce, Chandigarh - Court Judgment

Excerpt:
1. appellants are engaged in the manufacture of vanaspati falling under chapter 15 of the schedule to central excise tariff act, 1985. they were issued with a show-cause-notice dated 30.11.98 demanding differential duty of rs.72,27,073.20 as duty on soap stock manufactured by them, during the period between 23.7.96 to 28.2.97. action for violation of various provisions of the rules were also contemplated in the show-cause-notice. appellant raised a contention that during the period mentioned in the show-cause-notice they did not manufacture or sell any soap stock. they manufactured and sold only acid oil. at the intermediate stage of its manufacture soapy water came into existence and the soap water is not marketable commodity. earlier they manufactured soap stock with concentration varying from 15.98% to 33.16% and those sales were covered by 11 invoices which were submitted to the department. there after the alleged intermediate product of soap stock was not manufactured and sold. the demand made in the show-cause-notice in untenable.2. after considering the entire evidence adduced by the parties, the commissioner by order-in-original no.64/ce/99 dated 28.4.2000 confirmed that demand made in the show-cause-notice. he also imposed a penalty of like sum invoking the provisions contained in section 11ac of the central excise act. interest at the rate of 20% on the amount of duty with effect from 28.9.96 was also levied under section 11ab of the central excise act. this order of the commissioner is under challenge.3. at page 56 of the appeal paper the "process flow sheet" is made available by the manufacturer (for a proper understanding of the process, 'process flow sheet' is annexed to this order). it shows that soapy matter with concentration of fatty substance upto 5% is the waste obtained while oil is manufactured. that soapy matter of the above concentration of fatty substance is subjected to process which lead to acid oil. acid oil is a marketable commodity. the acid oil so obtained by the appellant was sold. but at the relevant time the acid oil was exempt from duty. learned counsel representing the appellant submitted before us that acid oil now manufactured are being sold and duty on that is being paid in accordance with the act and the rules.4. soapy matter which comes out as waste in the manufacture of oil can be subjected to alternate process. when it is subjected to such an alternate process soap stock is obtained. the soap stock so obtained by resort to the second alternate process were sold by the appellant under 11 invoices which are mentioned at page 3 of the impugned order. this soap stock so manufactured had fat contents varying from 15.98% to 33.16%. the soap stock with 33.16% of fatty substance covered by invoice no.4185 dated 25.6.96 was sold at rs.4,111.84 per unit.5. on going through the impugned order it is seen that learned commissioner assessed the entire quantity of soapy water treating it as soap stock. he valued the soapy water fixing its value at 4,111/- per unit as seen from invoice no.4185 dated 25.6.96. in paragraph 35 of the impugned order the commissioner observed that: "therefore, the waste/residue containing tfm ranging from 15 to 34%, which has already been sold cannot be said to be as not marketable at a later stage. i therefore, conclude that waste/residue consumed captively by the noticee are marketable." from this conclusion arrived at by the commissioner it is crystal clear that he valued the entire quantity of soapy water which was having a concentration of less than 5% of fatty matter at rs.4111.84. this was a clear error committed by him. this is more so when there is no iota of evidence to show that the entire quantity of soap water which was having less than 5% concentration of fat substance was marketable. nor could it be treated as soap stock. this conclusion we take because of the specification given by indian standard for a thing to be called soap stock. as per the indian standard specification, soap stock should have a minimum of 20% total fatty matter. therefore, the commissioner was clearly in error in treating the entire soapy water as marketable commodity. the further error committed by him was to value it at rs.4,111/- per unit which is the value for soap stock covered by invoice no.4185 dated 25.6.96 which had concentration of fatty material to the tune of 33.16%.5. soapy water obtained by the appellant in the process of manufacture of vegetable oil which was having less than 5% fat, was not a marketable commodity. assertion made by the appellant that after 23.7.96 no soap stock was manufactured out of the soapy water was found to be incorrect by the commissioner in the impugned order, without any data. during that period acid oil was produced and sold. hence the commissioner erred in holding that soap stock, a marketable commodity was produced during the relevant period.6. in view of the findings the question of limitation raised by the learned counsel representing the appellant need not be gone into.7. before parting with the case we would like to add that the quantity of soap stock has been found out from the quantity of acid oil manufactured by the appellant. roughly it works out to be 5:1 i.e. 5 units of soap stock is required to manufacture with 1 unit of acid oil.acid oil is not obtained from soap stock. acid oil is obtained from soap water. while working backwards the quantity arrived at by the commissioner in the impugned order was not of soap stock but of soapy water. that quantity of soapy water is not marketable commodity.in the circumstances detailed above, we allow the appeal and set aside the order impugned in its entirety.

Judgment:
1. Appellants are engaged in the manufacture of Vanaspati falling under Chapter 15 of the Schedule to Central Excise Tariff Act, 1985. They were issued with a Show-cause-notice dated 30.11.98 demanding differential duty of Rs.72,27,073.20 as duty on soap stock manufactured by them, during the period between 23.7.96 to 28.2.97. Action for violation of various Provisions of the rules were also contemplated in the show-cause-notice. Appellant raised a contention that during the period mentioned in the Show-cause-notice they did not manufacture or sell any soap stock. They manufactured and sold only Acid Oil. At the intermediate stage of its manufacture soapy water came into existence and the soap water is not marketable commodity. Earlier they manufactured soap stock with concentration varying from 15.98% to 33.16% and those sales were covered by 11 Invoices which were submitted to the Department. There after the alleged intermediate product of soap stock was not manufactured and sold. The demand made in the show-cause-notice in untenable.

2. After considering the entire evidence adduced by the parties, the Commissioner by Order-in-Original No.64/CE/99 dated 28.4.2000 confirmed that demand made in the show-cause-notice. He also imposed a penalty of like sum invoking the Provisions contained in Section 11AC of the Central Excise Act. Interest at the rate of 20% on the amount of duty with effect from 28.9.96 was also levied under Section 11AB of the Central Excise Act. This order of the Commissioner is under challenge.

3. At page 56 of the appeal paper the "process Flow Sheet" is made available by the manufacturer (For a proper understanding of the process, 'Process Flow Sheet' is annexed to this order). It shows that Soapy matter with concentration of fatty substance upto 5% is the waste obtained while oil is manufactured. That soapy matter of the above concentration of fatty substance is subjected to process which lead to Acid Oil. Acid Oil is a marketable commodity. The Acid Oil so obtained by the appellant was sold. But at the relevant time the Acid Oil was exempt from duty. Learned Counsel representing the appellant submitted before us that Acid Oil now manufactured are being sold and duty on that is being paid in accordance with the Act and the Rules.

4. Soapy matter which comes out as waste in the manufacture of Oil can be subjected to alternate process. When it is subjected to such an alternate process soap stock is obtained. The soap stock so obtained by resort to the Second alternate process were sold by the appellant under 11 Invoices which are mentioned at page 3 of the impugned order. This soap stock so manufactured had fat contents varying from 15.98% to 33.16%. The soap stock with 33.16% of fatty substance covered by Invoice No.4185 dated 25.6.96 was sold at Rs.4,111.84 per Unit.

5. On going through the impugned order it is seen that learned Commissioner assessed the entire quantity of soapy water treating it as soap stock. He valued the soapy water fixing its value at 4,111/- per unit as seen from Invoice No.4185 dated 25.6.96. In paragraph 35 of the impugned order the Commissioner observed that: "Therefore, the Waste/Residue containing TFM ranging from 15 to 34%, which has already been sold cannot be said to be as not marketable at a later stage. I therefore, conclude that Waste/Residue consumed captively by the noticee are marketable." From this conclusion arrived at by the Commissioner it is crystal clear that he valued the entire quantity of soapy water which was having a concentration of less than 5% of fatty matter at Rs.4111.84. This was a clear error committed by him. This is more so when there is no iota of evidence to show that the entire quantity of soap water which was having less than 5% concentration of fat substance was marketable. Nor could it be treated as soap stock. This conclusion we take because of the specification given by Indian Standard for a thing to be called soap stock. As per the Indian Standard Specification, soap stock should have a minimum of 20% total fatty matter. Therefore, the Commissioner was clearly in error in treating the entire soapy water as marketable commodity. The further error committed by him was to value it at Rs.4,111/- per unit which is the value for soap stock covered by Invoice NO.4185 dated 25.6.96 which had concentration of fatty material to the tune of 33.16%.

5. Soapy water obtained by the appellant in the process of manufacture of vegetable oil which was having less than 5% fat, was not a marketable commodity. Assertion made by the appellant that after 23.7.96 no soap stock was manufactured out of the soapy water was found to be incorrect by the Commissioner in the impugned order, without any data. During that period Acid oil was produced and sold. Hence the Commissioner erred in holding that soap stock, a marketable commodity was produced during the relevant period.

6. In view of the findings the question of limitation raised by the learned Counsel representing the appellant need not be gone into.

7. Before parting with the case we would like to add that the quantity of soap stock has been found out from the quantity of Acid Oil manufactured by the appellant. Roughly it works out to be 5:1 i.e. 5 units of soap stock is required to manufacture with 1 Unit of Acid Oil.

Acid Oil is not obtained from soap stock. Acid Oil is obtained from soap water. While working backwards the quantity arrived at by the Commissioner in the impugned order was not of soap stock but of soapy water. That quantity of soapy water is not marketable commodity.

In the circumstances detailed above, we allow the appeal and set aside the order impugned in its entirety.