The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Hyderabad Bench, has held that “waste mud” (spent earth) arising during the refining of crude palm oil is not an excisable good and therefore not liable to Central Excise duty. 

The bench of Angad Prasad (Judicial Member) and A.K. Jyotishi (Technical Member) has observed that once the circular itself stood rescinded, reliance on it to treat waste by-products as excisable goods was untenable. It further noted that “spent earth” emerges involuntarily during the bleaching process and not through any conscious manufacturing effort. 

The dispute arose after the department alleged that “waste mud” generated during the bleaching process of crude palm oil was classifiable under Tariff Heading 1522 0090 and attracted excise duty. A show cause notice was issued on the ground that the assessee had failed to discharge duty on such goods. The adjudicating authority had earlier upheld the demand by relying on the CBIC Circular dated 28.10.2009 and the premise that bleaching amounts to manufacture and the by-product had marketability. 

The appellant contended that the issue was already settled in its favour in an earlier decision for the same period wherein similar demands were dropped. It was further argued that “spent earth” is merely a waste product arising unavoidably in the refining process and cannot be treated as a manufactured excisable good.

The Tribunal framed the core issue as whether such “waste mud” qualifies as “excisable goods” under Section 2(d) of the Central Excise Act, 1944, particularly after the amendments introduced in 2008. 

Relying heavily on its prior ruling in the appellant’s own case and a series of judicial precedents, the Tribunal observed that the department’s case was primarily based on CBIC Circular dated 28.10.2009. However, the said circular had been quashed by the Allahabad High Court and subsequently withdrawn by the CBIC following the Supreme Court’s ruling in the case of DSCL Sugars Ltd. 

The Tribunal took note of the CBIC Circular dated 25.04.2016, which clarified that by-products such as bagasse, dross, and similar waste materials are to be treated as non-excisable goods, even if cleared for consideration. Such materials may be treated as “exempted goods” only for the limited purpose of input tax credit reversal under Rule 6 of the Cenvat Credit Rules, 2004. 

The Tribunal acknowledged that Notification No. 89/1995-CE provides a broad exemption to waste, parings, and scrap arising during the manufacture of excisable goods, further supporting the appellant’s case.

The Tribunal held that mere emergence of a by-product does not automatically render it excisable, especially when it arises incidentally and without any deliberate process of manufacture.

The Tribunal concluded that the impugned order was not sustainable in law and set it aside, allowing the appeal in favour of the assessee.

Case Details

Case Title: M/s 3F Industries Ltd Versus Commissioner of Central Excise & Service Tax

Citation: JURISHOUR-1033-CES-2026(HYD) 

Case No.: Excise Appeal No. 22096 of 2014

Date:  29.04.2026

Counsel For  Appellant: Y. Sreenivasa Reddy, Advocate

Counsel For Respondent: M. Anukathir Surya, AR 

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