TAIPEI (AFP) - Taiwanese health authorities said on Friday they were investigating more than 200 companies that allegedly used recycled cooking oils obtained from restaurants in their products, in the latest food safety scandal to hit the island.

Police and prosecutors also said two underground factories were busted on suspicion of selling processed waste oils - collected from cookers, fryers and grease traps - including to one that supplied leading food oil manufacturer Chang Guann Co.

Another factory allegedly recycled grease from leather processing plants for oils used in animal feeds.

Officials said that Chang Guann then sold the oils on to at least 235 companies, including a number of leading brands, as lard-based cooking oils.

The investigation was launched after police received tip-offs that waste oils were being collected from restaurants and food stands, processed and then resold.

The health authorities are investigating all the firms that may have sold or used the tainted material in their products.

Chang Guann has apologised but said it was unaware that the oils were recycled so it too was a victim in the case. The company said it had bought a total of 243 tonnes of the oil since it first started purchasing from the factory in February.

Wei Chuan Foods Corp, the Taiwanese unit of Ting Hsin International Group, which owns the Master Kong instant noodle brand, said it has recalled 12 types of products such as meat paste and pork floss - a type of shredded dried pork - since late Thursday for allegedly containing the recycled oils.

"We deeply regret that this incident has caused (public) uneasiness and we reserve all legal rights against Chang Cuann... We will cooperate with the authorities in inspections," it said in a statement. The company estimated a loss of TW$79.4 million (S$3.32 million) from recalling and disposing of products in storage.

So far, the authorities have seized 49 tonnes of suspected recycled oils from Chang Guann after inspecting the company on Thursday, and has ordered all companies it supplies to recall products that may contain the tainted oils, according to the health ministry.

If charges are brought, the culprits could face fraud charges as well as a fine Tw$50 million for violating food safety law.

The latest case was the second food scandal to hit Taiwan in less than a year. In November 2013, Wei Chuan and other companies were ordered by the authorities to recall tens of thousands of bottles of tainted cooking oil it purchased from Changchi Foodstuff Factory.

In December 2013, the factory owner was sentenced to 16 years in prison for selling olive oil adulterated with cheap cottonseed oil and banned colouring agent copper chlorophyllin.