Clarification regarding Waste Oil - Demand only within normal limitation period
VARIOUS units are engaged in re-refining of waste oil or used lubricating oil collected from the transformers, service stations of vehicles etc. A doubt has arisen on the excisability of re-refined used oil or waste oil. Used Oil contains impurities and contaminants such as moisture, diluents, sediments, metal particles and carbon. In refining units, waste or used oil undergoes various process such as dehydration-for removal of moisture, distillation-for removal of diluents, clay polishing- for removal of carbon by adsorption process, filtration-for removal of the clay and the dissolved carbon to render it usable. The oil so obtained from such waste or used oil is packed and sold as base oil, lubricating oil and transformer oil etc. to the consumers for further use.
Chapter note 4 of chapter 27 is a deeming fiction on manufacture and provides that:-
"In relation to the lubricating oils and lubricating preparations of heading 2710, labelling or re-labelling of containers and re-packing from bulk pack to retail packs or the adoption of any other treatment to render the product marketable to the consumers, shall amount to manufacture"
The Board clarifies that for a re-refining unit, the test for levy of Central Excise duty is whether the lubricating oil (produced from the waste oil) has undergone any of the process listed in chapter note 4 of chapter 27. Where such process has been carried out, it would amount to manufacture and Central Excise duty would be leviable.
Board has further given a very important clarification in tune with its ‘ease of doing business' initiatives - The issue is interpretational in nature and therefore where a demand is raised pursuant to this circular, it should be raised for normal period of limitations only. SSI benefit, where admissible, should be extended.
CBEC Circular No. 1024/12/2016-CX., Dated: April 11, 2016