CBEC clarifies on levy of excise duty on waste oil

The Central Board of Excise and Customs (CBEC) has issued clarification regarding levy of excise duty on waste oil collected from service stations of vehicles and transformers.

In refining units, the waste or used oil undergoes various processes such as dehydration for removal of moisture, distillation for removal of diluents and 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 to the consumers for further use, CBEC said.
Issuing clarification, it said when one of the processes - labelling or re-labelling of containers; re-packing from bulk pack to retail packs and adoption of any other treatment to render the product marketable - is carried out on lubricating oil or lubricating preparations it would be deemed to be manufacture.

"A unit processing waste oil or used oil would need to be examined...whether the process undertaken by them amounts to manufacture. Where the process amounts to manufacture, Central Excise duty is payable," it said in a circular.

It further said 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".

The CBEC issued the clarification after it received references regarding excisability of re-refined used oil or waste oil. Various units are engaged in re-refining of waste oil or used lubricating oil collected from the transformers, service stations of vehicles and other sources.