2014 (8) TMI 499 - AT - Central Excise

Waiver of pre deposit Area based Exemption Appellant manufacturer of decorative laminates are located in Uttaranchal and were availing duty exemption under notification no.50/2003-CE dated 10.06.2003 - Revenue denied exemption that resin are classifiable under Heading 3909 - Held that - Since the products, in question, are the resins specifically covered by sub-heading no.3909, we are of the prima facie view that the goods, in question, are correctly classifiable under Heading no.3909 and hence being in the negative list of the notification no.50/2003, would not be eligible for exemption under this notification. Since the final products-decorative plywood etc. are exempt from duty under notification no.50/2003-CE, captive consumption exemption under notification no. 67/95-CE would not be available in respect of the resins. The only point of dispute which remains to be decided is as to whether these resins in the form in which the same are cleared for captive consumption, are marketable and hence, excisable. Merely on the basis of shelf life, the marketability of a product cannot be determined. Therefore, the question of marketability of the resins, in question, requires in depth consideration based on the evidence on record which is possible only at the stage of final hearing, and this question cannot be decided only on the basis of shelf life. Therefore, at this stage, it cannot be said that this question is likely to be decided in favour of the Appellants - stay granted partly.

Issues Involved:
1. Classification of Resins
2. Marketability and Excisability of Resins
3. Eligibility for Duty Exemption under Notification No. 50/2003-CE
4. Applicability of Captive Consumption Exemption under Notification No. 67/95-CE
5. Invocation of Extended Period for Demand
6. Requirement of Pre-deposit for Stay of Recovery

Issue-wise Detailed Analysis:

1. Classification of Resins:
The appellants manufacture various resins (Urea Formaldehyde Resin, Melamine Formaldehyde Resin, Cordanol Formaldehyde Resin, and Phenol Formaldehyde Resin) for captive use in their final products. The department classified these resins under heading 3909 of the Central Excise Tariff, making them ineligible for exemption under Notification No. 50/2003-CE. The appellants argued that these resins should be classified under heading 3506, which covers "prepared glues and other prepared adhesives not elsewhere specified or included." However, the tribunal found that the resins are specifically covered by heading 3909 and thus fall under the negative list for exemption.

2. Marketability and Excisability of Resins:
A key issue was whether the resins are marketable and thus excisable. The appellants contended that the resins have a very short shelf life (2-3 days, extendable to 15 days under controlled conditions) and are not marketable. They cited the Supreme Court ruling in Moti Laminates Pvt. Ltd., which held that such resins are not excisable due to their limited shelf life. The department countered this by presenting evidence from the Chemical Examiner and internet data suggesting a longer shelf life (13-32 days) and marketability. The tribunal noted that shelf life alone is not the sole criterion for marketability and that the existence of a market must be inferred from factors like commercial journals and trade catalogues. This issue requires in-depth consideration based on evidence, which can only be resolved at the final hearing.

3. Eligibility for Duty Exemption under Notification No. 50/2003-CE:
The tribunal held that since the resins are classified under heading 3909, they are not eligible for duty exemption under Notification No. 50/2003-CE, which applies to the final products (decorative plywood, etc.) but not to the resins themselves.

4. Applicability of Captive Consumption Exemption under Notification No. 67/95-CE:
The tribunal found that the resins used for captive consumption in the manufacture of exempt final products (decorative plywood, etc.) are not eligible for exemption under Notification No. 67/95-CE. Since the final products are exempt from duty, the resins used in their manufacture do not qualify for captive consumption exemption.

5. Invocation of Extended Period for Demand:
The department invoked the extended period under the proviso to Section 11A(1) of the Central Excise Act, 1944, alleging suppression of material facts by the appellants. The tribunal, however, was of the prima facie view that malafide intent could not be attributed to the appellants due to the Supreme Court ruling in Moti Laminates Pvt. Ltd. Therefore, the extended period for demand may not be applicable.

6. Requirement of Pre-deposit for Stay of Recovery:
The tribunal directed the appellants to make partial pre-deposits within eight weeks to stay the recovery of the balance amounts. The amounts specified were:
- M/s. Greenply Industries Ltd.: Rs. 40 Lakhs
- M/s. Archidply Industries: Rs. 1.05 Crores
- M/s. Rama Panels Pvt. Ltd.: Rs. 15 Lakhs
- M/s. Shirdi Industries Ltd.: Rs. 1.5 Crores

Upon compliance, the requirement for pre-deposit of the remaining amounts would be waived, and recovery stayed until the disposal of the appeals.

Conclusion:
The tribunal addressed the classification and marketability of the resins, determining their excisability and eligibility for duty exemptions. It also considered the invocation of the extended period for demand and directed partial pre-deposits for staying recovery, pending final resolution of the appeals.

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