M.R. Subramani

Chennai, Jan. 5

SOLVENT extractors, especially of soyabean, are facing a tricky situation with the Central Excise authorities demanding penalty, including interest, on the duty to be paid for hexane used by them.

Hexane is used by the extractors as solvent to obtain de-oiled soyabean cake and soyabean oil. Soyameal or de-oiled soyabean cake constitutes 81.5 per cent the extraction process, with the oil making up the rest. In view of this, the cake is considered as the final product.

According to the Soyabean Processors Association of India (SOPA), excise authorities have claimed duty on the grounds that the extractors were exporting only the cake and not the oil.

Mr Rajesh Agrawal, Chairman of SOPA, in a letter to Mr A.K. Singh, Chairman, Central Board of Excise and Customs (CBEC), said the Directorate-General of Foreign Trade had accepted that only soyameal was exported and included hexane among the standard input and output norms (SION) under the duty exemption scheme.

"The Government had issued a notification (No. 43/01-C.E. (N.T.) dated 26/06/01) permitting solvent extractors to procure hexane without payment of duty. Accordingly, we have also given an undertaking to the Deputy Commissioner, Central Excise," he said.

The authorities had inspected the factories to satisfy themselves with the claim and the extractors were filing details of input-output ratio for the hexane utilised.

Initially, the Government allowed purchase of 10 litres of hexane without excise for producing one tonne of meal. However, it was subsequently cut to 9.2 litres.

Mr Agrawal said the excise authorities should also consider the fact that the country was a large importer of edible oil and at no point of time was oil being exported.

Stating that soyameal should be treated as a final product and not as a by-product going by the Central Excise Act, he said exports of meal earned foreign exchange to the tune of Rs 3,500 crore.

Providing details of edible oil imports, Mr Agrawal urged CBEC to issue the necessary clarification.

The issue comes with a host of other problems that solvent extractors currently face. This year, they are facing squeeze on their margins as farmers are demanding a higher price, while rates for soyameal in the global markets have declined.

In between, they were also caught by the closure of all markets in Madhya Pradesh, when traders went on strike for 10 days in protest against direct procurement of oilseeds by some companies.

(This article was published in the Business Line print edition dated January 6, 2005)
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