2017 (11) TMI 3 - AT - Central Excise

Area Based exemption - N/N. 50/2003-CE dated 10.6.2003 - Revenue entertained a doubt about misuse of the said area based exemption by the appellant in as much as they are also manufacturing various resins namely, Melamine Formaldehyde Resin (MFR) and Phenolic Formaldehyde Resin (PFR), which are further used in the manufacture of various Laminated Boards - Office Memorandum dated 1.6.2012 issued by the Ministry of Chemicals and Fertilizers - Held that - similar issue decided in the case of M/s Shirdi Industries Ltd. Versus Commissioner of Central Excise & S.T., Meerut-II 2017 (6) TMI 885 - CESTAT ALLAHABAD , where it was held that Once it is established that paper is quoted with certain resols which have the essential characteristics of meriting classification under chapter 39 and which according to Note-01 of chapter 39 are to be called plastics. The clarification dated 1.6.2012 given by the Ministry of Chemicals and Fertilizers has persuasive value. The impugned goods are outside the purview of the Chapter 39 - appeal allowed - decided in favor of appellant.

Summary

Issues:
Classification of PFR/MFR resins under area-based exemption notification.

Analysis:
The appellant, a manufacturer of high pressure laminates, availed area-based exemption under Notification No.50/2003-CE. Revenue suspected misuse as the appellant also manufactured Melamine Formaldehyde Resin (MFR) and Phenolic Formaldehyde Resin (PFR), classifiable under Chapter heading 3909. Show cause notices were issued covering June 2009 to February 2013. The Commissioner confirmed duty demand after allowing credit on inputs. The appellant contended that PFR/MFR resins are classifiable under heading 3506 for the exemption. They argued that as adhesives, the resins should be classified under 3506, not Chapter 39. Reference was made to HSN Explanatory Notes and case laws supporting their classification. They highlighted the non-marketable nature of MF/PF resins, citing relevant circulars and memorandums.

The AR supported the adjudicating authority's findings. The Tribunal noted the investigation based on statements and market enquiries, similar to a previous case. The Tribunal cited a judgment where marketability was crucial in classification. It found errors in the Commissioner's reliance on unsubstantiated data and lack of chemical composition comparison. The Tribunal emphasized the binding nature of a clarificatory circular from the Ministry of Chemicals and Fertilizers. It observed the glue manufactured by the appellant was not covered under Chapter 39, as per HSN explanatory notes. Referring to a previous case, the Tribunal held that glue not in primary form is not classifiable under Heading 39.09. The Tribunal applied the previous judgment to the present case due to similar facts and noted the persuasive value of the clarificatory circular.

Based on the coordinate bench's judgment, the Tribunal held the impugned goods outside Chapter 39, setting aside the order and allowing the appeal. The question of limitation was left open. The decision was pronounced in open court, concluding the case.