1997 (1) TMI 85 - HC - Central Excise

Summary

Issues:
1. Challenge to the levy of excise duty on the aqueous solution of Phenolic Resin.
2. Interpretation of Tariff Item 15A and whether the product falls within its ambit.
3. Determination of whether the aqueous solution of Phenolic Resin is an intermediary product or a finished product.
4. Application of the test of marketability in assessing excisability of goods.
5. Consideration of amendments to the tariff item post-judgment.

Detailed Analysis:
1. The judgment pertains to a Letter Patents Appeal challenging the levy of excise duty on the aqueous solution of Phenolic Resin. The Single Judge had quashed the excise duty orders and directed a refund to the respondents. The issue revolved around whether the product was liable for excise duty under Tariff Item 15A.

2. The Tariff Item 15A covered artificial or synthetic resin and plastic materials. The respondents contended that their product, an aqueous solution of Phenolic Resin, was an intermediary product and not resin manufactured in liquid form. The Single Judge concurred, leading to the quashing of the excise duty orders and the refund directive.

3. The appellants argued that the product should be considered a finished product, citing market knowledge and chemistry references. However, the respondents maintained that their process did not complete the manufacture of phenolic resin, stopping at the aqueous solution stage. The court agreed with the respondents, emphasizing the need for distillation or evaporation to produce the final resin.

4. The court referenced a Supreme Court decision emphasizing the test of marketability for excisability. It was held that even if a product fits the tariff description, it must be marketable to be dutiable. In this case, as the resin was not fully manufactured and marketable, the aqueous solution of resin was not liable for excise duty.

5. The judgment highlighted amendments to the tariff item post-case, indicating the legislative intent to include "solution of resin" within its scope. This supported the court's finding that the aqueous solution of resin was an intermediary product not subject to excise duty. The appeal was dismissed, affirming the Single Judge's decision and discharging the Bank guarantee provided by the respondents.